The International Monetary Fund has raised India’s growth forecast to 7 per cent for both 2026 and 2027, citing strong domestic demand and services activity. The upgrade comes as higher oil prices and conflict in the Middle East weigh on the global economic outlook…reports Asian Lite News Desk
The International Monetary Fund (IMF) has raised India’s economic growth forecast to 7 per cent for 2026, keeping the country among the fastest-growing major economies despite rising oil prices and the economic impact of conflict in the Middle East.
In its October 2026 World Economic Outlook, released on Tuesday, the Fund projected India’s growth at 7 per cent in both 2026 and 2027 on a fiscal year basis.
The 2026 forecast represents an increase of 0.6 percentage points from the July 2026 update and 0.5 percentage points from the April assessment. The projection for 2027 was raised by 0.3 percentage points from July and 0.5 percentage points from April.
India’s economy grew by 7.8 per cent in 2025, according to the report, which presents the country’s fiscal year 2025-26 in its 2025 figures.
On a calendar year basis, the IMF forecast growth of 7.4 per cent in 2026 and 7 per cent in 2027.
The Fund attributed the improved outlook to stronger-than-expected economic momentum, supported by domestic demand and robust activity in the services sector.
“India’s growth remained robust, underpinned by domestic demand and services, despite higher oil prices,” the report said.
It added that India stood out among emerging market economies because of sustained momentum and growing evidence of stronger growth potential. The Fund cited favourable demographic trends, an expanding domestic market and continued structural reforms as factors supporting the outlook.
The report also highlighted India’s relative resilience amid a more challenging global environment, with economic downgrades concentrated among countries directly affected by the Middle East conflict and energy-importing emerging economies, excluding India.
However, the IMF expects consumer price inflation in India to rise to 5 per cent in 2026, compared with 2 per cent in 2025, before easing to 4.4 per cent in 2027.
India’s current account deficit is projected to reach 1.5 per cent of gross domestic product in 2026 and 1.3 per cent in 2027, compared with 0.7 per cent in 2025.
On public finances, the report said India was an exception among major advanced and emerging economies where primary budget deficits remained substantially higher than pre-pandemic levels. In most of those economies, stabilising debt relative to GDP at 2025 levels would require greater fiscal consolidation than currently planned.
The IMF also pointed to trade agreements involving India as potential drivers of economic cooperation. It said agreements with the European Union and the United Kingdom, alongside arrangements involving other trading partners, could reduce tariff and non-tariff barriers, help economies adjust to recent trade policy changes and strengthen supply chains.
The global outlook remains more subdued. The IMF projected worldwide growth of 3.1 per cent in 2026 and 3.4 per cent in 2027, while emerging and developing Asia is expected to expand by 5.1 per cent in 2026.
China’s growth is forecast to slow to 4.5 per cent in 2026 and 4 per cent in 2027, from 5 per cent in 2025. The US economy is projected to grow by 2.3 per cent in both years.
The Middle East and Central Asia region is forecast to contract by 0.3 per cent in 2026 before recovering by 7.9 per cent in 2027. Saudi Arabia’s economy is projected to shrink by 3.3 per cent in 2026.
The IMF’s baseline assumes average oil prices of $95.74 a barrel in 2026 and $87.39 in 2027, compared with $67.74 in 2025. Global headline inflation is expected to rise to 4.7 per cent in 2026 before easing to 4.1 per cent in 2027.
IMF Chief Economist Silvana Tenreyro said global activity had remained resilient despite a more persistent disruption to energy markets than anticipated, but warned that the outlook faced significant risks.
The report said risks were “skewed to the downside”, warning that a prolonged or escalating conflict in the Middle East could keep energy and food prices high, revive inflationary pressures and weigh on economic growth.
