IMF Raises India Growth Forecast to 7 Percent for FY27 and FY28

The International Monetary Fund raised its forecast for India's GDP growth in fiscal year 2026-27 to 7 percent, up from 6.4 percent in its July update. It also lifted the projection for 2027-28 to 7 percent from 6.7 percent.

The revisions appear in the October 2026 World Economic Outlook released during the Fund's annual meetings in Bangkok. IMF staff attributed the stronger outlook to resilient domestic demand and robust activity in the services sector. India recorded 7.8 percent growth in the April-June quarter of FY27, exceeding earlier expectations and prompting parallel upgrades from the Reserve Bank of India and the World Bank, both of which now see 7.1 percent for the year.

On a calendar-year basis the Fund puts India's expansion at 7.4 percent in 2026 and 7 percent in 2027. The October numbers reverse a modest downgrade the IMF made in July, when it had trimmed the FY27 figure by 10 basis points to 6.4 percent amid concerns over energy costs. The latest text notes that growth has remained robust despite higher oil prices linked to conflict in the Middle East.

Global growth is projected at 3.1 percent in 2026, a small increase from the July estimate of 3 percent, and 3.4 percent in 2027. Advanced economies are expected to expand more slowly. The Fund observes that upward revisions are concentrated in a few large emerging markets, with India standing out because of favourable demographics, a large domestic market and ongoing structural reforms.

India's inflation is forecast at 5 percent in 2026 before easing to 4.4 percent in 2027. The baseline assumes the Strait of Hormuz reopens in March 2027 and broader conditions return toward pre-conflict levels by October 2027. Energy prices are expected to stay above earlier levels, with some emerging markets facing tighter supply if inventories remain low.

The upgrade follows similar moves by the Asian Development Bank and the OECD. Domestic demand has been supported by public capital expenditure and private consumption, while services exports and domestic tourism have added momentum. The Fund's assessment does not quantify the precise contribution of any single policy measure, but it links the trajectory to sustained reforms that have widened the tax base and improved logistics.

Risks remain. Prolonged disruption to shipping through the Strait of Hormuz or a sharper rise in oil prices could feed through to domestic fuel costs and import bills. A slower recovery in advanced economies would also weigh on services exports. The October outlook nonetheless treats India's near-term path as more resilient than that of most other major economies facing the same external pressures.

Finance Ministry officials have not issued a formal response to the specific revision, but recent statements have emphasised the same drivers of domestic demand and services growth cited by the IMF. The next official national accounts data for the July-September quarter will provide a further check on whether the momentum has continued into the second half of the fiscal year.