IMF raises India’s FY26 growth forecast to 6.6% despite US tariffs

The International Monetary Fund (IMF) on Tuesday has revised upwards India’s GDP growth forecast for the current fiscal by 0.2 percentage points to 6.6 percent,compared to its earlier estimate of 6.4 per cent, citing strong domestic momentum that is expected to offset the impact of higher US tariffs on Indian goods.In its latest World Economic Outlook report released in Washington, the IMF said the upward revision reflects a “carryover from a strong first quarter more than offsetting the increase in the US effective tariff rate on imports from India since July.” India’s fiscal year runs from April to March.India’s economy grew by a stronger-than-expected 7.8 per cent in the April–June quarter, driven by robust private consumption and steady investment activity, helping the country retain its position as the world’s fastest-growing major economy despite headwinds from global trade tensions.However, the IMF lowered India’s growth estimate for the following fiscal year (2026–27) by 0.2 percentage points to 6.2 per cent, citing global uncertainty and weaker external demand due to higher tariffs imposed by the United States.
The IMF’s revision comes shortly after the World Bank also upgraded its India growth forecast for 2025–26 to 6.5 per cent, up from 6.3 per cent, while trimming its projection for 2026–27 to 6.3 per cent amid trade frictions with the US.The IMF noted that emerging market and developing economies are expected to see growth moderate from 4.3 per cent in 2024 to 4.2 per cent in 2025 and 4 per cent in 2026. “Beyond China, emerging market and developing economies more broadly showed strength, sometimes because of particular domestic reasons, but recent signals point to a fragile outlook there as well,” the report stated.The global lender highlighted that rising trade policy uncertainty and higher US tariffs are curbing external demand and weighing on investment sentiment, especially in export-driven economies.Despite the external challenges, India’s resilient domestic consumption, infrastructure spending, and ongoing reforms are expected to sustain strong growth momentum, reinforcing its position as a key driver of global economic expansion in the coming years.

(Business Correspondent)