In its July 2025 World Economic Outlook Update, the International Monetary Fund (IMF) has raised India’s GDP growth forecast to 6.4% for 2025, with similar projections for 2026 and FY27, citing a stable global environment and improved financial conditions. India is expected to become the fourth-largest economy in 2025 and third by 2027.
Global growth estimates were revised to 3% in 2025 and 3.1% in 2026. However, the IMF flagged key downside risks such as trade tensions, tariff hikes, fiscal imbalances, and geopolitical uncertainty. It emphasized the importance of stable, confidence-building policies, financial resilience, and structural reforms. Emerging economies are projected to grow steadily around 4%.
The International Monetary Fund (IMF), in its July 2025 World Economic Outlook Update, has revised India’s GDP growth forecast upward by 0.2 percentage points to 6.4% for 2025, citing a more favorable global environment. It also raised the projection for FY27 by 0.1 percentage point to 6.4%, indicating steady medium-term optimism.
According to the IMF, India’s economy is now expected to grow at 6.4% in both 2025 and 2026. The revised projections reflect a relatively stable global environment, better financial conditions, and expectations of milder external shocks compared to its April forecast. On a calendar year basis, India’s GDP is projected to expand by 6.7% in 2025 and 6.4% in 2026.
This comes on the heels of similar revisions by other global agencies. On June 24, S&P Global Ratings raised India’s 2025–26 growth projection to 6.5%, up from its May forecast of 6.3%. The upgrade was based on assumptions of a normal monsoon, easing global crude oil prices, and the likelihood of monetary policy easing.
In contrast, the IMF had trimmed India’s FY26 growth outlook in April by 30 basis points to 6.2%, attributing the cut to rising trade tensions and global uncertainty. The latest revision suggests improving global conditions have helped boost confidence in India’s growth potential.
Earlier, in February 2025, the Reserve Bank of India (RBI) had estimated GDP growth of 6.7% for FY26, driven by strong household consumption, a rebound in industrial activity, and improving rural demand. However, amid escalating trade risks and increasing tariff-related uncertainties, the central bank revised its forecast downward to 6.5% in April.
IMF tweaks global growth forecast
At the global level, the IMF expects economic growth to reach 3% in 2025 and 3.1% in 2026—up by 0.2 and 0.1 percentage points, respectively, from April estimates. These adjustments are driven by- expected tariff adjustments, expansionary fiscal policies in major economies, and enhanced access to financing.
As per the IMF report, “Global growth is projected at 3.0 per cent for 2025 and 3.1 per cent in 2026, an upward revision from the April 2025 World Economic Outlook. This reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions, and fiscal expansion in some major jurisdictions.”
IMF report also indicated that global headline inflation is expected to decline to 4.2% in 2025 and further to 3.6% in 2026. Although broadly in line with the April outlook, inflation is projected to remain above target in the United States, while appearing more contained in other advanced economies.
Additionally, IMF data from April predicted that India would overtake Japan in 2025 to become the world’s fourth-largest economy with a GDP of US$ 4.187 trillion. By 2027, India is expected to surpass Germany, securing its position as the third-largest global economy.
IMF report highlighted that the emerging market and developing economies are expected to grow by 4.1% in 2025 and 4.0% in 2026. Yet, the IMF has cautioned that this moderate growth path is vulnerable to several downside risks, such as rising trade barriers, ongoing geopolitical tensions, and stalled tariff negotiations. It reiterated that, as outlined in the April 2025 World Economic Outlook, the balance of risks continues to lean toward the downside. A renewed increase in effective tariff rates could weaken growth, while prolonged uncertainty may place further strain on economic activity—particularly if upcoming tariff deadlines pass without the conclusion of meaningful and lasting agreements.
The IMF also warned that persistent fiscal deficits or a rise in global risk aversion could lead to higher long-term interest rates, further tightening financial conditions. It added that any worsening in global trade relations or fresh supply chain disruptions could push up commodity prices and increase market volatility. These challenges, coupled with growing concerns about economic fragmentation, could spark renewed instability in financial markets. However, on a more positive note, global growth could improve if trade negotiations yield a stable framework and lead to lower tariffs.
The IMF concluded by stressing the need for policies that foster confidence, predictability, and sustainability—by easing tensions, safeguarding price and financial stability, rebuilding fiscal space, and pushing forward with critical structural reforms.
