IMF raises India growth forecast to 7%, warns of fragmented global outlook

The International Monetary Fund (IMF) has raised its GDP growth forecast for India to 7% for 2026-27, up from 6.4% in July, on the back of “stronger-than-expected momentum, supported by resilient domestic demand and robust services activity”. The sharp increase in the forecast for the current fiscal comes days after the Reserve Bank of India (RBI) did the same. The Indian central bank now expects India’s GDP to expand by 7.1% this year.

“India stands out with upward revisions, reflecting sustained momentum and growing evidence of stronger growth potential supported by favourable demographic dynamics, a large and expanding domestic market, and continued structural reforms,” the IMF said in an update to its flagship World Economic Outlook report.

GDP growth in 2027-28 is also seen at 7%, up from the July estimate of 6.7%.

The IMF’s forecasts assume that the average price of crude oil — across Brent, Dubai Fateh, and West Texas Intermediate — will be $95.74 per barrel in 2026, up 41% from 2025. In 2027, the oil price is assumed to decline around 9% to $87.39.

The sharply higher growth forecast for India is in contrast to the global economy. In 2026, the IMF now sees the world growing by 3.1%, only slightly higher than 3% in July. Meanwhile, global growth in 2027 is seen unchanged at 3.4%.

Fragmented outlook

According to the multilateral agency, the negative supply shock from the war in West Asia is making its way through the world economy. And while the private sector has seemingly adjusted well to the conflict and trade-related shocks, the “possibility of larger economic costs” is becoming “more palpable”. This is because the conflict is dragging on and buffers are becoming narrower.

Countries that are now projected to grow at a significantly higher rate in 2026 than in July include Germany (1.3% versus 0.7%) and UK (1.3% versus 1%). In fact, advanced economies as a whole are seen growing 2.1% in 2026, up from 1.7% before.

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On the other hand, emerging markets and developing economies are now expected to grow 3.7% in 2026, down from 3.8% in July. This is despite the sharp upward revision made to India’s 2026-27 growth forecast.

The marking down of growth for emerging markets and developing economies was down to the likes of China, Russia, Brazil, and West Asian countries expected to either expand at a weaker pace or contract.

While China is seen growing 10 bps slowed in both 2026 (4.5%) and 2027 (4%), the 2026 forecasts for Brazil and Russia have been lowered by 20 bps each to 2.2% and 0.9%, respectively.

The West Asia region, hit hardest by the conflict, is now expected to shrink.

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“Bahrain, Iraq, Kuwait, and Qatar — commodity producers most affected by disruptions to energy output and transport – are projected to experience double-digit contractions of their economies in 2026,” the IMF said, adding that Saudi Arabia — while less affected — will see its economy decline by 3.3% in 2026 as against a growth forecast of 1.7% in July.

This fragmented outlook — due to some countries being in close proximity to the conflict and more dependent on imported energy and others having greater ability to gain from the AI boom — “leaves the global economy vulnerable to setbacks from both directions”.

“Policymakers need to do two things at once: Contain the immediate risks from inflation, debt, and financial fragility while putting in place the infrastructure, skills, and competitive environment needed for technological transformation to translate into broader and more balanced growth, with the gains distributed more evenly across and within countries,” the IMF said.

The 2026 annual meetings of the IMF and the World Bank Group kicked off on Monday in Bangkok, Thailand. They will conclude on Sunday.