IMF lifts India FY27 growth to 6.5% as lower US tariffs offset risks

IMF has raised India's FY27 growth forecast to 6.5 per cent, saying lower US tariffs could offset the impact of West Asia tensions even as global growth and trade outlook weaken

The International Monetary Fund (IMF) on Tuesday raised its forecast for India’s GDP growth in financial year 2026-27 (FY27) by 10 basis points to 6.5 per cent, from 6.4 per cent projected in its January outlook, expecting the adverse impact of the conflict in West Asia to be outweighed by the reduction in additional US tariffs on Indian goods from 50 per cent to 10 per cent. 

The marginal upgrade for India assumes significance as the IMF pared its global growth hopes for 2026 to 3.1 per cent from 3.3 per cent estimated this January, with the deleterious impact of West Asia conflict likely to be felt more by emerging markets and developing economies (EMDEs). The Fund expects EMDEs’ growth to slip to 3.9 per cent this year from 4.4 per cent last year, and 4.2 per cent projected before the US-Iran conflict.

 

The Fund’s FY27 growth projection for India is lower than the Reserve Bank of India (RBI) and Asian Development Bank (ADB) estimates of 6.9 per cent and the World Bank’s projection of a 6.6 per cent uptick.

 

India, the Fund reckoned, is likely to maintain a steady growth trajectory, with output expanding at 6.5 per cent in both FY27 and FY28, citing strong carryover from a better-than-expected performance in the previous year (FY26) and improved external conditions. It expects retail inflation to rebound to 4.7 per cent in FY27 after subdued food prices drove a marked decline in FY26. 

The IMF also noted that overall risks are firmly on the downside, with some adverse risks like a protracted West Asia conflict gaining prominence. The conflict will have a varied impact on growth in different countries, given their differential exposure through geographic proximity, financial flows, remittances, and energy dependencies. 

In several South Asian and Southeast Asian economies, including India, the West Asia disruptions are expected to reduce tourism and remittance inflows, thereby weakening domestic demand. 

The IMF expects world trade volume growth to slow to 2.8 per cent in 2026 from 5.1 per cent in 2025, before recovering to 3.8 per cent in 2027. 

Tangible progress in trade talks could lower tariffs and support global activity, the IMF reckoned. “It could also enhance policy predictability, allowing businesses to plan better and unlock investment plans,” it added. 

On upside risks to the broader outlook, it noted potential larger gains if cooperation extends to services trade, foreign direct investment (FDI), and international taxation, citing that “efforts to develop or complete new regional trade agreements might help reduce trade costs and facilitate adjustment to recent policy changes, such as the EU’s recent trade agreements with India and Mercosur."