In a major boost to confidence in the Indian economy, IMF recently raised India’s GDP growth foreseen for the fiscal year 2025–26 (FY26) to 7.3%. The revision was made on Monday, January 19, 2026, as part of the IMF’s World Economic Outlook, and is a 0.7 percentage point up from a previous estimate released last October. This modification strengthens India as the world’s fastest-growing major economy, ahead of peers like China and the United States.
Why the Upgrade Would Happen
The IMF’s decision to increase the growth forecast is driven by a number of “hot” economic indicators that topped forecasts in the latter half of 2025:
- Positive Quarter 3 Performance: The Indian economy delivered a "better-than-expected” quarter-on-quarter performance in the third quarter of the current fiscal (Q3) resulting in a substantial roll-over for FY26.
- Resilient Domestic Demand: In the face of global trade headwinds, private consumption in India is still robust, due to a rebound in rural household incomes.
- Public Investment Momentum: Ongoing government spending on infrastructure — roads, railways and digital public goods — has been a main driver of growth.
Taming Inflation
Inflation is expected to be coming under strain closer to the RBI’s target band of 2%–6% thanks to softening global oil prices and stable food supplies, the IMF has said.
Against the World’s Peers
Although the global economy is projected to grow unchanged but modestly 3.3% in 2026, India is one of our “bright spots.” For comparison, the IMF estimates:
- China: 4.5%.
- United States: 2.4%.
- Euro Area: 1.3%.
The World Bank has recently echoed this optimism, lifting its own India FY26 outlook to 7.2%, citing the same domestic strengths.
The Road Ahead: 2027 & Beyond
Although 7.3% is a moment of celebration, the IMF also warned growth could moderate to about 6.4% in FY27 and FY28. Analysts attribute such expected “cooling” to waning cyclical tailwinds and some potential effects from shifts affecting global trade.
The IMF says to maintain these high rates, sustained private capital expenditure and structural reforms to the labor market will be crucial.
