Washington (IANS): The International Monetary Fund (IMF) on Monday raised India’s economic growth projection for 2025 by a sharp 0.7 percentage point to 7.3 per cent, citing stronger-than-expected performance in the second half of the year, even as it expects growth momentum to moderate in the years ahead.
In its latest World Economic Outlook Update, the IMF said the upward revision reflects a “better-than-expected outturn in the third quarter and strong momentum in the fourth quarter,” reinforcing India’s status as one of the fastest-growing major economies globally.
The Fund, however, projected that India’s growth rate would ease to 6.4 per cent in both 2026 and 2027 as cyclical and temporary drivers fade. Despite this moderation, India is expected to remain a key engine of growth among emerging market and developing economies.
According to the IMF, emerging market and developing economies are projected to expand at just over 4 per cent in 2026 and 2027, with Emerging and Developing Asia continuing to benefit from robust technology-related investment and trade, even as global economic momentum becomes increasingly uneven.
At the global level, the IMF said growth is projected to remain steady at 3.3 per cent in 2026. This outlook is supported by easing trade tensions, accommodative financial conditions and a surge in technology-linked investments, particularly in artificial intelligence.
The update also pointed to improving inflation dynamics in India. The IMF noted that inflation in the country “is expected to return to near target levels after a marked decline in 2025, driven by subdued food prices,” which could provide further support to domestic demand.
However, the Fund cautioned that risks to the global and Indian outlook remain tilted to the downside. A reassessment of expectations surrounding AI-driven productivity gains could trigger a pullback in investment and tighter global financial conditions, potentially affecting emerging economies through spillover effects.
On the upside, the IMF said faster and more widespread adoption of artificial intelligence could lift global growth, provided productivity gains materialise and financial risks are effectively contained.
