The International Monetary Fund (IMF) on Tuesday raised India’s economic growth forecast to 7 per cent for 2026, citing stronger-than-expected domestic demand and robust services activity, even as the conflict in the Middle East and elevated oil prices weigh on the global economy.
In its October 2026 World Economic Outlook (WEO), the IMF projected India’s growth at 7 per cent in both 2026 and 2027 on a fiscal-year basis, keeping the country among the world’s fastest-growing major economies.
The 2026 forecast represents an upward revision of 0.6 percentage points from the July 2026 WEO Update and 0.5 percentage points from the April forecast. The projection for 2027 was raised by 0.3 percentage points from July and 0.5 percentage points from April.
India’s economy expanded by 7.8 per cent in fiscal year 2025-26, according to the report, which presents fiscal-year data under the year in which the fiscal period begins.
On a calendar-year basis, the IMF projected India’s growth at 7.4 per cent in 2026 and 7 per cent in 2027.
The Fund said the upward revision “reflects stronger-than-expected momentum, supported by resilient domestic demand and robust services activity”.
“India’s growth remained robust, underpinned by domestic demand and services, despite higher oil prices,” the report said.
The IMF noted that the medium-term global economic outlook had become increasingly uneven, with downward revisions concentrated in economies directly affected by the Middle East conflict and energy-importing emerging and developing economies, excluding India.
“India stands out with upward revisions, reflecting sustained momentum and growing evidence of stronger growth potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms,” it said.
On inflation, the IMF projected India’s consumer prices to rise by 5 per cent in 2026, compared with 2 per cent in 2025, before moderating to 4.4 per cent in 2027.
The country’s current account deficit is expected to widen to 1.5 per cent of GDP in 2026 from 0.7 per cent in 2025, before narrowing to 1.3 per cent in 2027.
The report also highlighted India’s relatively favourable fiscal position. It noted that primary deficits in major advanced and emerging economies during 2020-25 remained substantially above pre-pandemic levels.
However, the IMF said India was an exception among economies where stabilising debt-to-GDP ratios at 2025 levels would require greater fiscal consolidation than currently planned.
On international trade, the Fund said recent agreements, including those between the European Union and India, the EU and MERCOSUR, and the United Kingdom and India, could help reduce tariff and non-tariff barriers, strengthen supply-chain resilience and support adjustments to changing global trade policies.
Meanwhile, the IMF projected China’s economic growth to slow to 4.5 per cent in 2026 and 4 per cent in 2027, compared with 5 per cent in 2025.
The Fund attributed the slowdown to higher global oil prices, prolonged uncertainty and structural challenges affecting economic activity.
The United States is projected to expand by 2.3 per cent in both 2026 and 2027.
Globally, economic growth is forecast at 3.1 per cent in 2026 and 3.4 per cent in 2027, while emerging and developing Asia is expected to grow by 5.1 per cent in 2026.
The Middle East and Central Asia region is projected to contract by 0.3 per cent in 2026, reflecting the economic impact of the ongoing conflict. Saudi Arabia’s economy is forecast to shrink by 3.3 per cent during the year before rebounding by 7.9 per cent in 2027.
The IMF’s baseline projections assume average oil prices of $95.74 per barrel in 2026 and $87.39 in 2027, compared with $67.74 in 2025.
Global headline inflation is expected to increase to 4.7 per cent in 2026 before easing to 4.1 per cent in 2027.
“Global activity is projected to grow at 3.1 per cent in 2026 and 3.4 per cent in 2027,” IMF Chief Economist Silvana Tenreyro wrote in a blog accompanying the report.
She said the outlook “remains broadly unchanged from April, despite a more persistent energy market disruption than anticipated”, but cautioned that “this resilience is under strain”.
The IMF warned that risks to the global economic outlook remain “skewed to the downside”, particularly due to geopolitical tensions and uncertainty surrounding energy markets.
“A prolonged stalemate or further escalation in the Middle East could keep energy and food prices elevated and volatile, revive inflationary pressures, worsen fiscal and external balances, and weigh on growth,” the report said.
