IMF Forecasts India's Economy to Grow at 6.6% in FY 2025-26, Outpacing China's 4.8% Growth

India is projected to maintain its position as one of the fastest-growing emerging market economies, with a growth rate of 6.6% in 2025-26 according to the International Monetary Fund's World Economic Outlook report.

This growth forecast represents an upward revision, largely driven by India's robust economic performance in the first quarter, which has effectively counterbalanced the impact of increased US tariffs on Indian exports.

The IMF forecasts place India ahead of China, which is expected to grow at a more modest 4.8%. These projections come as the IMF reassesses global economic conditions following recent trade tensions and tariff implementations between major economies.

Looking further ahead, the IMF has adjusted India's 2026 growth projection downward to 6.2%, citing potential diminishing momentum from the strong first quarter performance.

Global economic growth is expected to reach 3.2% in 2025 before slowing to 3.1% in 2026, with the impact of tariffs proving less severe than initially anticipated. Nevertheless, these projections remain below pre-policy-shift forecasts.

The report indicates that global inflation will continue its downward trajectory, though with significant regional variations. Inflation remains above target in the United States with upside risks, while remaining subdued in other regions.

Advanced economies are forecast to grow at an average rate of 1.6%, while emerging market and developing economies are expected to achieve 4.2% growth, with a projected 0.2% deceleration in 2026.

Among advanced economies, Spain leads with a projected growth rate of 2.9%. The United States is expected to grow at 1.9%, down from 2.4% in 2024.

Other notable growth forecasts include Brazil at 2.4%, Canada at 1.2%, and Japan at 1.1%, while ASEAN-5 countries also feature in the outlook.

Although the IMF's October World Economic Outlook predictions show improvement compared to April forecasts, they still represent a downward revision relative to pre-tariff projections.

Despite India's impressive growth trajectory, the IMF anticipates a slight slowdown in global economic expansion from 3.3% in 2024 to 3.2% in 2026.

The report highlights several risk factors, including prolonged uncertainty, increased protectionism, and labor supply constraints that could hamper growth. Additionally, fiscal vulnerabilities, potential financial market corrections, and institutional erosion pose threats to economic stability.

In response to these challenges, the IMF has urged policymakers to implement credible, transparent, and sustainable policies, combining trade diplomacy with macroeconomic adjustments.

The IMF emphasized that "Fiscal buffers should be rebuilt. Central bank independence should be preserved. Efforts on structural reforms should be redoubled."

Earlier in October, the IMF revised India's growth forecast upward to 6.6%, largely attributable to strong growth momentum in the first quarter of FY26, when the economy expanded by 7.8%.

This upward revision primarily reflects the carryover effect from the strong first quarter rather than any offsetting impact from recent US tariffs.

In 2024-25, India's economy grew by 6.5% in real terms. Despite uncertainties surrounding US tariffs, the Indian government has maintained its GDP growth forecast at 6.3-6.8% for 2025-26, reflecting confidence in the country's resilient domestic consumption.