IMF Upgrades India’s FY26 Growth Outlook to 6.6%: Five Key Factors

India’s economic growth prospects have brightened further, with the International Monetary Fund (IMF) revising its FY26 growth forecast to 6.6%, up from 6.4% projected in July. The upward revision, announced in the IMF’s October 2025 World Economic Outlook, underscores the country’s resilience amid a volatile global environment.

According to the report, “growth is projected to be 6.6 percent in 2025 and 6.2 percent in 2026.” The IMF attributed the improved outlook to a carryover from a stronger-than-expected first quarter, which more than offset the impact of higher U.S. import tariffs imposed on Indian goods since July.

Momentum from a robust start

India’s economy expanded 7.8% in the first quarter of FY26, marking the fastest pace in over a year. Economists expect the second quarter to sustain around 7% growth, bolstered by domestic consumption, healthy credit growth, and a rebound in private investment. The IMF highlighted that India’s domestic demand and services exports remain key engines driving momentum.

The latest upgrade aligns with similar projections from other global and domestic agencies. The World Bank recently raised its FY26 estimate to 6.5% from 6.3%, while the Reserve Bank of India (RBI) lifted its forecast to 6.8% from 6.5%. Both institutions cited steady consumption, fiscal discipline, and the positive impact of GST reforms.

Also Read: India Emerging As Key Engine Of Global Growth: IMF Chief | Republic World

Inflation outlook softens

The IMF also sharply revised down India’s inflation forecast for FY26 to 2.8%, compared to 4.2% estimated in April. It expects inflation to average 4% in FY27, slightly lower than its previous 4.1% estimate.

This dovetails with official data showing retail inflation cooling to 1.54% in August, the lowest in over eight years, and remaining below 2% for a second consecutive month in September.

Even as global growth slows and trade tensions persist, India continues to stand out as the world’s fastest-growing major economy, reflecting the strength of its domestic fundamentals and policy stability.