IMF Raises India's FY27 and FY28 Growth Forecasts to 7 Percent on Domestic Demand

The International Monetary Fund raised its forecast for India's GDP growth to 7.0 percent for both FY27 and FY28 in its October 2026 World Economic Outlook, released during the annual meetings in Bangkok. The FY27 figure is 60 basis points above the July estimate of 6.4 percent and 50 basis points above the April projection. The FY28 estimate rose 30 basis points from July's 6.7 percent.

The Fund attributed the upgrade to stronger-than-expected momentum supported by resilient domestic demand and robust services activity. India's economy expanded 7.8 percent in FY26 and in the April-June quarter of FY27. On a calendar-year basis the IMF projects 7.4 percent growth in 2026 and 7.0 percent in 2027. Consumer prices are forecast to rise 5.0 percent in 2026 before easing to 4.4 percent in 2027.

India stands out among emerging-market economies with upward revisions, the report said. Faster growth reflects evidence of stronger potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms. The upgrade occurred even as the IMF assumes higher oil prices linked to Middle East conflict and a gradual reopening of the Strait of Hormuz by March 2027.

Other institutions have made similar moves. The World Bank and Reserve Bank of India recently raised their FY27 forecasts to 7.1 percent. The OECD lifted its projection by 80 basis points to 7.1 percent last month. China's growth is projected to moderate to 4.5 percent in 2026 and 4.0 percent in 2027 amid higher oil prices and structural challenges. Global output is expected to grow 3.1 percent in 2026, up from the July estimate of 3.0 percent, though still below the pre-pandemic average.

The IMF noted that the AI boom has supported activity in Asia, with India and China as major growth drivers. Energy-importing emerging markets face divergent prospects depending on inventories and access to cargoes. India's services strength and domestic consumption have cushioned the pass-through from elevated global energy prices more effectively than in many peers.

For Indian policymakers the revision confirms that near-term momentum remains intact even as external risks from oil and geopolitics persist. The Fund's baseline does not assume a rapid resolution of Middle East tensions. Sustained reforms in labour, logistics and financial markets will determine whether the 7 percent path holds beyond the current fiscal years.

India's position as one of the fastest-growing major economies is unchanged in the outlook. The gap with slower-growing peers widens if domestic demand continues to offset higher import costs. Markets will watch the next quarterly GDP print and the RBI's policy response for confirmation of the trajectory the IMF has now marked higher.