IMF Projects India's Economy to Grow 6.4% in FY26-27 Amid Global Slowdown

India's economy is anticipated to expand by 6.4 percent in fiscal year 2026-27, bolstered by strong private consumption and active service sectors. Although global growth is predicted to ease to 3.0 percent in 2026, domestic demand is set to drive India's economic growth amidst international uncertainties. The Reserve Bank of India also predicts a vibrant economic landscape for the country.

India remains among the fastest growing major economies, despite a marginal downgrade to its near-term growth outlook, the International Monetary Fund (IMF) said in its July 2026 World Economic Outlook (WEO) Update, projecting the country's economy to grow 6.4% in FY26-27, down from the 6.5% projected in April, before accelerating to 6.7% in FY27-28, up from the earlier projection of 6.5%.

The FY26-27 projection is 0.1 percentage point lower than the IMF's April forecast, while the FY27-28 estimate has been revised up by 0.2 percentage point.

“India remains among the fastest-growing major economies, with growth projected at 6.4 percent, supported by strong momentum in private consumption and services activity," the report said.

Also Read: IMF lowers 2026 global growth outlook to 3%, projects 3.4% growth in 2027

Global growth slows amid war and AI-driven shifts

The global lender expects world growth to moderate to 3.0% in 2026 from an average of 3.5% recorded during 2024-25 before recovering to 3.4% in 2027.

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According to the report, the modest slowdown reflects "the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption."

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While the global growth in 2026 and 2027 remain broadly unchanged on a cumulative basis compared with the forecasts in the April 2026 World Economic Outlook (WEO), the IMF said the underlying picture has become increasingly uneven, with countries' performance depending largely on their exposure to the Middle East conflict and their position in the global technology value chain.

“Energy exporters outside the conflict zone benefit from favorable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers. In contrast, activity weakens for energy importers with limited participation in the technology value chain, a group that includes many low-income countries,” the report noted.

Domestic demand to anchor India's expansion

For India, however, domestic demand remains the key growth driver.

The IMF's projections indicate that robust household consumption and resilient services activity are expected to continue supporting economic expansion despite a more challenging global environment marked by higher commodity prices, persistent geopolitical uncertainty and slower global trade.

Also Read: India climbs global manufacturing rankings amid China+1 shift

RBI growth forecast

India's economic growth accelerated to 7.7% in 2025-26 from 7.1% a year earlier, as per government data. The economy expanded 7.8% in the January-March quarter of FY26, compared with 8% in the previous quarter.

The Reserve Bank of India in its June Monetary Policy Committee headed by the Governor Sanjay Malhotra lowered its FY27 GDP growth forecast to 6.6% from 6.9%, citing rising risks from the ongoing West Asia conflict, elevated energy prices, supply disruptions and weather-related uncertainties.

The central bank now expects GDP growth of 6.6% in the first quarter, 6.3% in the second quarter, 6.5% in the third quarter and 6.8% in the fourth quarter of FY27.