IMF lowers India's FY27 growth to 6.4%, expects 6.7% rebound in FY28

The International Monetary Fund (IMF) has marginally lowered India's economic growth forecast for the current financial year, citing global uncertainties and elevated energy prices triggered by geopolitical tensions. Despite the downward revision, the multilateral lender reaffirmed that India will remain one of the world's fastest-growing major economies, backed by resilient domestic demand and a robust services sector.In its July 2026 World Economic Outlook (WEO) Update released on Wednesday, the IMF projected India's Gross Domestic Product (GDP) to grow 6.4 per cent in FY2026-27, trimming its earlier estimate of 6.5 per cent made in April. The Fund, however, struck a more optimistic tone for the following fiscal, raising its FY2027-28 growth forecast to 6.7 per cent from the earlier projection of 6.5 per cent, indicating confidence in India's medium-term economic prospects.
The revised outlook comes after India's economy expanded by a robust 7.7 per cent in FY2025-26, according to official data.
"India remains among the fastest-growing major economies, with growth projected at 6.4 per cent, supported by strong momentum in private consumption and services activity," the IMF said in the report.The Fund attributed the modest downgrade primarily to an increasingly uncertain global environment, particularly the economic impact of the conflict in West Asia, which has kept crude oil prices elevated and added pressure on global trade and supply chains.However, it expects India's growth momentum to strengthen in FY2027-28 as external headwinds begin to ease, with domestic consumption and services continuing to provide a strong foundation for economic expansion.
Global Growth Outlook Remains Moderate
Globally, the IMF expects economic growth to moderate to 3 per cent in 2026, down from an average of 3.5 per cent during 2024-25, before improving to 3.4 per cent in 2027. These projections remain broadly unchanged from the Fund's April assessment.The report noted that while risks have become more balanced compared to a few months ago, they remain tilted to the downside."The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions," the IMF warned.The Fund also flagged growing trade fragmentation, which could weaken global output while adding to inflationary pressures. It cautioned that an abrupt correction in technology-driven market expectations, coupled with limited policy buffers across economies, could further amplify global risks.
Energy Prices Emerge as Key Concern
The IMF's latest projections are based on the assumption that disruptions in the Strait of Hormuz begin easing from mid-July and that conditions broadly return to pre-conflict levels by March 2027. Nevertheless, it now expects the average petroleum spot price index to reach $89 per barrel in 2026, about 9 per cent higher than assumed in its April forecast.Higher crude prices are expected to spill over into other commodities, keeping inflationary pressures elevated across several economies.Global headline inflation is projected at 4.7 per cent in 2026, before easing to 3.9 per cent in 2027.The report comes amid renewed concerns over geopolitical instability after US President Donald Trump indicated that the ceasefire with Iran had effectively ended, triggering another spike in crude oil prices. Brent crude rose to around $76 per barrel on Wednesday from nearly $72 per barrel a day earlier.
Mixed Outlook Across Major Economies
The IMF left its 2026 growth forecast for the United States unchanged at 2.3 per cent, while marginally increasing the 2027 projection to 2.2 per cent from 2.1 per cent.For the euro area, the Fund lowered its 2026 growth estimate to 0.9 per cent from 1.1 per cent projected earlier, while maintaining its 2027 forecast at 1.2 per cent.China's economy is expected to expand 4.6 per cent in 2026, with the IMF citing persistent structural challenges, elevated energy prices and global uncertainty as factors weighing on activity.
Growth in emerging markets and developing economies is projected to slow to 3.8 per cent in 2026 before recovering to 4.5 per cent in 2027, reflecting varying levels of exposure to commodity prices, trade disruptions, financial conditions and global technology supply chains.While the global economy continues to grapple with geopolitical tensions and volatile energy markets, the IMF believes India's strong domestic consumption, expanding services sector and resilient economic fundamentals will help it maintain its position as one of the fastest-growing large economies, with growth expected to regain momentum in the coming fiscal year.

(Business Correspondent)