The International Monetary Fund (IMF) has raised India’s economic growth projection for 2025 to 7.3 per cent, underlining renewed optimism driven by stronger-than-expected corporate earnings and resilient economic momentum entering the final quarter of the financial year. The upgrade signals a decisive turnaround from the uncertainty witnessed last year and reinforces India’s position as one of the fastest-growing major economies globally.
In its latest World Economic Outlook, the IMF revised India’s 2025 growth forecast upward by 0.7 percentage points, attributing the improvement to a sharp recovery in third-quarter corporate performance and sustained domestic demand. However, the Fund expects growth to moderate to 6.4 per cent in 2026 and 2027, as temporary cyclical tailwinds gradually fade.
IMF: Recovery After a Turbulent Phase
The revision comes after a challenging period marked by slowing earnings growth, market volatility and cautious foreign investor sentiment. Last year, weaker corporate profitability, combined with elevated equity valuations and global trade disruptions, triggered capital outflows and raised concerns over India’s export competitiveness, particularly following tariff actions by the United States.
According to the IMF, the recent earnings revival is now acting as a stabilising force. Improved profitability is expected to rebuild investor confidence, support financial market stability and encourage fresh capital inflows—early indicators of what the Fund described as “green shoots” in the broader economic landscape.
India Set to Outperform Global Peers
Despite a projected moderation after 2025, India is expected to continue outperforming the global economy. The IMF estimates global growth at 3.3 per cent in 2025 and 2026, easing slightly to 3.2 per cent in 2027. By contrast, India’s projected 6.4 per cent growth in both 2026 and 2027 places it well ahead of major economies.
For comparison, the United States is expected to grow at 2.4 per cent in 2026, China at 4.5 per cent, and the Euro Area at a subdued 1.3 per cent. Within emerging and developing Asia, India remains the clear growth leader, contributing significantly to the region’s projected 5.0 per cent expansion in 2026.
IMF: Global Economy Shows Resilience
The IMF noted that the global economy has largely absorbed the immediate shock from tariff-related disruptions. “Global economic growth continues to show notable resilience despite significant US-led trade disruptions and heightened uncertainty,” the Fund said, adding that growth this year is 0.2 percentage point higher than earlier estimates, largely supported by the US and China.
A key driver of this resilience has been a surge in technology and artificial intelligence (AI) investment. The IMF highlighted that IT investment as a share of US economic output has reached its highest level since 2001, boosting business investment and generating positive spillovers for Asia’s technology exporters.
AI Investment and Policy Support
Worldwide, companies have stepped up capital spending on AI, which the IMF identified as a critical pillar supporting global growth. Additional factors include easing trade tensions, stronger fiscal support than anticipated, accommodative financial conditions and improved policy frameworks in several emerging market economies.
Looking ahead, the Fund said global growth could rise by up to 0.3 percentage points in 2026, depending on the pace of AI adoption and broader improvements in digital readiness.
Inflation Outlook and Risks
On inflation, the IMF expects global headline inflation to ease from 4.1 per cent in 2025 to 3.8 per cent in 2026 and 3.4 per cent in 2027. India’s inflation is projected to move closer to target levels following a marked decline in 2025, supported largely by softer food prices.
However, the IMF also flagged several downside risks. Elevated valuations in AI-linked sectors could reverse investor sentiment if earnings disappoint. A sharp correction in US equity markets could trigger global wealth losses, weaken consumption and raise borrowing costs, particularly for low-income and high-debt economies.