The International Monetary Fund (IMF) has slightly increased its growth forecast for the Indian economy. It now expects India to grow at 6.5 per cent, up from its earlier estimate of 6.4 per cent made in January. This revision comes even as tensions continue to rise in West Asia.

The IMF said India’s economy remains strong and resilient. It believes the country will maintain steady growth over the next few years.

Reasons Behind the Upward Revision

The IMF explained that several factors supported this improved outlook. It said, “For 2026, growth is revised upward moderately by 0.3 percentage point (0.1 percentage point relative to January) to 6.5 per cent, led by positive contributions from the carryover of the strong 2025 outturn and the decline in additional US tariffs on Indian goods from 50 to 10 per cent, which outweigh the adverse impact of the Middle East conflict. Growth is projected to stay at 6.5 percent in 2027.”

In simple terms, strong economic performance in 2025 and reduced US tariffs on Indian exports have helped boost growth expectations. These gains are expected to offset the negative effects of ongoing conflicts in the Middle East.

Government Sees Faster Expansion

While the IMF has given a positive outlook, the Indian government remains even more optimistic. It has projected economic growth at 7.6 per cent for the financial year 2025-26. This estimate is one full percentage point higher than the IMF’s forecast.

This difference shows that domestic authorities expect stronger momentum in the economy compared to global institutions.

Inflation Likely to Rise

The IMF also highlighted concerns about inflation. It expects prices to rise sharply in the coming years.

India’s inflation is projected to increase to 4.7 per cent in FY27, compared to 2.1 per cent in FY26. After that, inflation is expected to ease and return to the Reserve Bank of India’s target level of 4 per cent by FY28.

The IMF noted, “Inflation in China is projected to start rising from low levels, whereas inflation in India is expected to return to near target levels after subdued food prices drove a marked decline in 2025.”

This means lower food prices had earlier helped keep inflation under control, but that effect may not last.

Global Growth Expected to Slow

The IMF also warned that the global economy is likely to slow down. It has reduced its global growth forecast to 3.1 per cent from 3.3 per cent. In comparison, the world economy had grown by 3.4 per cent in 2025.

The report suggests that rising geopolitical tensions and economic uncertainties are weighing on global growth.

Impact on Major Economies

The IMF said the United States and China will see only a small impact, with their growth forecasts reduced by just 0.1 percentage point.

However, Europe is expected to face more challenges. The United Kingdom’s growth is likely to drop by 0.5 percentage point. Meanwhile, the Euro Area may see a slowdown of 0.2 percentage points.

This indicates that Europe could be the most affected region in the current global environment.