India’s Economy: Ahead of the FY27 Budget, IMF revises GDP growth to 7.3%
Virendra Pandit
New Delhi: As Finance Minister Nirmala Sitharaman gives finishing touches to the General Budget for 2026-27, to be tabled in Parliament on February 1, the International Monetary Fund (IMF) on Monday International Monetary Fund (IMF) on Monday upped India’s growth estimates by 70 basis points to 7.3 percent for 2025.
This is tad lower than government’s estimate of 7.4 percent but at par with the RBI’s headline number of 7.3 percent, the media reported.
“In India, growth is revised upward by 0.7 percentage point to 7.3 percent for 2025, reflecting the better-than expected outturn in the third quarter of the year and strong momentum in the fourth quarter,” IMF said in its latest update to World Economic Outlook.
Growth is projected to moderate to 6.4 percent in 2026 (2026-27) and 2027 (2027-28) as cyclical and temporary factors wane. Inflation is expected to go back to near target levels after a marked decline in 2025 driven by subdued food prices.
In December 2025, the RBI revised the growth estimates by 50 basis points to 7.3 percent. It had said that domestic factors such as healthy agricultural prospects, continued impact of GST rationalisation, benign inflation, healthy balance sheets of corporate giants and financial institutions and congenial monetary and financial conditions should continue to support economic activity. Continuing reform initiatives would further facilitate growth.
On the external front, services exports are likely to remain strong, while merchandise exports face some headwinds. External uncertainties continue to pose downside risks to the outlook, while speedy conclusion of various ongoing trade and investment negotiations present upside potential, it said while adding that the risks are evenly balanced.
Meanwhile, the Asian Development Bank (ADB) has raised estimates by 70 basis points to 7.2 percent. India’s FY26 growth projection is upgraded, “driven primarily by robust domestic consumption supported by recent tax cuts,” ADB said in the latest Asian Economic Outlook.
Global Economy
The IMF said global economy is projected to remain resilient at 3.3 percent in 2026 and at 3.2 percent in 2027: rates similar to the estimated 3.3 percent outturn in 2025. The forecast marks a small upward revision for 2026 and no change for 2027 compared with that in the October 2025 World Economic Outlook (WEO).
This steady performance on the surface results from the balancing of divergent forces. “Headwinds from shifting trade policies are offset by tailwinds from surging investment related to technology, including artificial intelligence (AI), more so in North America and Asia than in other regions, as well as fiscal and monetary support, broadly accommodative financial conditions, and adaptability of the private sector,” it said.
A blog by IMFs’ Tobias Adrian and Pierre-Olivier Gourinchas said that global growth has been impressively resilient amid trade disruptions, but this masks underlying fragilities tied to the concentration of investment in the technology sector. The negative growth effects of trade disruptions are likely to build up over time. AI-driven investment offers transformative potential—but also introduces financial and structural risks that demand vigilance.
“The challenge for policymakers and investors alike is to balance optimism with prudence, ensuring that today’s tech surge translates into sustainable, inclusive growth rather than another boom-bust cycle. This is especially relevant in an environment marked by intensifying geopolitical strains and growing threats to institutional frameworks which make the implementation of good policies more challenging,” it said.
