IMF projects India to grow 6.6% in 2025, cuts projection for next year

The International Monetary Fund (IMF) in the October outlook increased India’s growth projections by 20 basis points to 6.6% for 2025 whilst projecting a decline of the same intensity to 6.2% in 2026. Meanwhile, the Washington-headquartered financial institution predicts global growth would edge upwards by 20 basis points to 3.2% this year, with the outlook for 2026 unchanged at 3.1%.

Elaborating the rationale for the upward revision for India, IMF attributed it to a carryover effect from a “strong” first quarter which helped New Delhi “more than offset” the impact of the U.S. President Donald Trump-induced tariff regime since July. India’s GDP in the June-end peaked had peaked to a five-quarter high of 7.8% driven primarily by sectors as manufacturing, services and construction.  The downward revision for 2026 thus considers a fading of the momentum from the first quarter.

Tariff shock “smaller than originally expected”

IMF attributed the slowdown in global growth to headwinds from “uncertainty and protectionism”. Although, it stated that the tariff shock is “smaller than originally announced [anticipated]”. “Global growth is holding steady despite major policy shifts. The increase in tariffs and its effect has been smaller than expected so far. This is thanks to new trade deals, multiple exemptions, and the private sector’s agility in rerouting supply chains,” said Pierre-Olivier Gourinchas, Chief Economist at the IMF.

However, poignant to note, notwithstanding observing “robust” global trade activity in the first quarter of the year, driven by strong growth in U.S. imports and in exports from Asia and the Euro area – indicative of a front loading ahead of high tariffs, IMF observes subsequent data exhibit “signs of deceleration” in the second quarter.

The Chief Economist explains despite a steady first half, the outlook remains “fragile”, and risk continue to emanate. “The main risk is that tariffs may increase further from renewed and unresolved trade tensions, which, coupled with supply chain disruptions, could lower global output by 0.3% next year,” he said.