IMF raises India's FY27 growth forecast to 7% from 6.4%
The IMF has raised India's growth outlook by 60 basis points
Synopsis
India's economy is projected to grow 7 per cent in FY27, higher than the 6.4 per cent estimated earlier, the International Monetary Fund (IMF) said in its October World Economic Outlook (WEO), as strong domestic demand and services activity helped the country withstand global economic disruptions.
India’s Current Position
The upward revision from the July forecast comes despite higher oil prices and continued geopolitical tensions arising from the conflict in the Middle East. The IMF also raised its FY28 growth forecast to 7 per cent from 6.7 per cent, suggesting that India's growth momentum could extend beyond the current financial year.
India remains among the fastest-growing major economies, with economic activity performing better than previously expected. The IMF upgrade follows similar action by other international agencies, as India's growth surprised on the upside in the first quarter, with the economy clocking a 7.8 per cent increase in economic output from last year.
Reserve Bank of India was the latest to revise its growth forecast upward to 7.1 per cent from 6.7 per cent projected earlier.
Domestic Demand Drives Upgrade
The IMF attributed the stronger outlook to resilient domestic demand and robust services activity, which have supported economic growth despite rising energy costs.
India's economy expanded 7.8 per cent in FY26, according to the figures presented in the WEO, and growth is projected to moderate to 7 per cent in FY27 before remaining at that level in FY28.
The improvement stands out against a more uneven global economic outlook, with the IMF warning that countries face divergent growth prospects depending on their exposure to higher energy prices and their participation in the global technology upturn.
The IMF also identified India's favourable demographic dynamics, large and expanding domestic market, and continued structural reforms as factors supporting its medium-term growth potential.
India Stands Out Amid Global Slowdown
It expects global economic growth to moderate from 3.5% in 2025 to 3.1% in 2026, before recovering to 3.4% in 2027. China's growth, meanwhile, is projected to slow from 5% in 2025 to 4.5% in 2026 and 4% in 2027, reflecting higher oil prices, weak domestic demand and continuing structural challenges.
The contrast is particularly significant as several energy-importing emerging economies face downward revisions to their growth outlook.
Inflation and External Risks Remain
Despite the growth upgrade, India continues to face risks from higher commodity prices and external imbalances. The IMF projects India's consumer inflation at 5% in FY27, compared with 2% in FY26, before moderating to 4.4% in FY28. India's inflation climbed to 5.5% in September, the highest level in the new series.
IMF's projection is slightly lower than the RBI's estimate of 5.2% for FY27. India's current account deficit is projected to widen to 1.5% of GDP in FY27 from 0.7% in FY26, before narrowing to 1.3% in FY28.
The global outlook remains vulnerable to further disruptions in oil supplies, renewed trade tensions and tighter financial conditions, even as India continues to demonstrate relatively strong growth momentum.