IMF Raises India GDP Growth Forecast To 7% For 2026 And 2027, Cites Strong Demand

The IMF attributed the upward revision to stronger-than-expected economic momentum, supported by domestic demand and robust activity in the services sector.

The IMF expects consumer price inflation in India to accelerate to 5% in 2026, compared with 2% in 2025, before easing to 4.4% in 2027.

Source : ABPLIVE AI

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Key points generated by AI, verified by newsroom

• IMF raised India's growth forecast for 2026, 2027.
• Strong domestic demand, services activity fueled the upward revision.
• India's inflation projected to accelerate to 5% in 2026.

The International Monetary Fund (IMF) has raised its growth forecast for India for 2026 and 2027, citing resilient domestic demand, strong services activity and evidence of sustained economic momentum. India has emerged as an exception to the broader trend of growth downgrades among economies facing the fallout of the Middle East conflict and higher energy prices.

In its October 2026 World Economic Outlook (WEO), released on Tuesday, the IMF projected India’s economy to grow by 7% in both 2026 and 2027 on a fiscal-year basis. The forecast for 2026 is 0.6 percentage points higher than the July estimate and 0.5 percentage points above the April projection.

For 2027, the Fund raised its estimate by 0.3 percentage points from July and 0.5 percentage points from April.

Why IMF Raised India’s Growth Forecast

The IMF attributed the upward revision to stronger-than-expected economic momentum, supported by domestic demand and robust activity in the services sector.

The report said India continued to record strong growth despite higher oil prices. It also highlighted favourable demographic trends, an expanding domestic market and ongoing structural reforms as factors supporting the country's growth potential over the medium term.

India’s economy grew by 7.8% in 2025, according to the report. On a calendar-year basis, the IMF projected growth of 7.4% in 2026 and 7% in 2027.

The upward revision comes as the Fund lowered its medium-term outlook for several economies directly affected by the West Asia conflict, as well as energy-importing emerging and developing economies. India was excluded from the latter group of downward revisions.

India’s Inflation Seen Rising To 5% In 2026

The IMF expects consumer price inflation in India to accelerate to 5% in 2026, compared with 2% in 2025, before easing to 4.4% in 2027.

The higher inflation projection comes against the backdrop of elevated global oil prices and disruptions to energy supplies amid the West Asia conflict.

The Fund's baseline outlook assumes average oil prices of $95.74 per barrel in 2026, falling to $87.39 in 2027. The corresponding average for 2025 was $67.74 per barrel.

India’s current account deficit is projected to widen to 1.5% of GDP in 2026, from 0.7% in 2025, before narrowing to 1.3% in 2027.

IMF Flags India’s Fiscal Position

India also received a favourable mention in the IMF’s assessment of public finances across major economies.

The report said primary deficits in the largest advanced and emerging market economies remained substantially higher during 2020-25 than before the Covid-19 pandemic. In most of these economies, stabilising debt-to-GDP ratios at their 2025 levels would require more fiscal consolidation than currently planned.

India was identified as an exception to this assessment, indicating that it would not need the same additional degree of fiscal adjustment under the Fund’s analysis.

India’s Trade Agreements Could Support Supply Chains

The IMF also highlighted the potential role of new trade agreements in helping economies adapt to changes in global trade policies.

The report cited recent European Union trade agreements with India and MERCOSUR, as well as the United Kingdom’s agreement with India. Such arrangements could reduce tariff and non-tariff barriers, support economic adjustment and improve supply-chain resilience, it said.

Global Growth Faces Pressure From West Asia Conflict

While India’s outlook improved, the IMF expects global growth to remain at 3.1% in 2026 before increasing to 3.4% in 2027. Emerging and developing Asia is projected to grow by 5.1% in 2026.

China’s growth is forecast to slow to 4.5% in 2026 and 4% in 2027, compared with 5% in 2025. The US economy is expected to expand by 2.3% in each of the next two years.

The West Asia and Central Asia region is projected to contract by 0.3% in 2026, before recovering to growth of 6.3% in 2027. The IMF attributed the downturn to the conflict and the closure of the Strait of Hormuz, which disrupted a route that carried around 20 million barrels of oil per day before the war.

In a blog accompanying the WEO, IMF Chief Economist Silvana Tenreyro said the global growth forecast remained broadly unchanged from April despite energy market disruptions lasting longer than anticipated. However, she warned that the resilience of economic activity was under strain.

The IMF cautioned that a prolonged stalemate or further escalation in the Middle East or Ukraine could keep energy and food prices elevated and volatile, revive inflationary pressures and weigh on global growth.

Input By : IANS