India is set to remain the world’s fastest-growing major economy in 2026, with the International Monetary Fund (IMF) upgrading its growth outlook despite a slowdown in the global economy.
In its October 2026 World Economic Outlook, released on 13 October, the IMF projected India’s economy to expand by 7 per cent in both 2026 and 2027 on a fiscal-year basis. The latest estimate for 2026 represents an increase of 0.6 percentage points from the Fund’s July forecast of 6.4 per cent. Its 2027 projection was also revised upwards by 0.3 percentage points.
On a calendar-year basis, India’s growth is forecast at 7.4 per cent in 2026 before moderating to 7 per cent in 2027. The revised projections underline the strength of India’s economic momentum at a time when several major economies are facing weaker growth prospects and mounting international uncertainties.
Global Growth Faces a Slower Outlook
The IMF expects global economic growth to ease to 3.1 per cent in 2026, down from 3.5 per cent in 2025, before recovering to 3.4 per cent in 2027. Global headline inflation is projected to rise to 4.7 per cent in 2026 before declining to 4.1 per cent the following year.
The Fund’s outlook points to an economy that has remained resilient but faces significant downside risks. Geopolitical tensions, higher energy prices, public debt pressures and uncertainty surrounding the returns from artificial intelligence investment could weigh on future growth.
Investment linked to artificial intelligence is providing support to economic activity in several markets. However, the benefits are unevenly distributed, with countries integrated into technology supply chains better positioned to benefit than economies facing higher energy costs and limited technology-related investment.
India Widens Its Growth Lead Over China
India’s projected growth rate places it well ahead of other major economies in 2026. The United States is forecast to grow by 2.3 per cent, while China’s economy is expected to expand by 4.5 per cent in 2026 and 4 per cent in 2027.
The IMF has lowered its projections for China, citing higher energy prices associated with the Middle East conflict and weaker domestic spending. Based on the latest forecasts, India’s projected growth rate is 2.5 percentage points higher than China’s in 2026, with the difference expected to widen in 2027.
Japan’s economy is projected to grow by just 0.7 per cent in both 2026 and 2027, highlighting the contrasting growth trajectories among the world’s major economies.
The report also identifies considerable uncertainty across other regions. Saudi Arabia’s economy is projected to contract by 3.3 per cent in 2026 after growing by 4.6 per cent in 2025, reflecting the effects of the Middle East conflict and disruptions to key shipping routes. The IMF expects the Saudi economy to rebound by 7.9 per cent in 2027.
Domestic Demand and Services Support India
The IMF attributed India’s improved outlook to stronger-than-expected economic momentum, resilient domestic demand and robust activity in the services sector. Investment associated with artificial intelligence was also identified as a contributor to growth.
The revised forecast follows official figures showing that India’s economy expanded by 7.8 per cent in the April–June quarter, exceeding the Reserve Bank of India’s estimate of 7 per cent. The IMF also reported that India recorded growth of 7.8 per cent in fiscal year 2025–26.
In its assessment, the Fund highlighted India’s favourable demographic dynamics, large and expanding domestic market and continued structural reforms as factors supporting its growth potential.
These conditions have helped India maintain a stronger growth trajectory than other major economies, even as international conflicts, energy-market pressures and trade uncertainty complicate the global outlook.
Risks Remain Despite the Upgrade
While the IMF’s revised projections provide a stronger outlook for India, the broader economic environment remains uncertain. Higher inflation, geopolitical tensions and pressure on energy-importing countries could affect economic activity in the months ahead.
The Fund expects global inflation to remain elevated in 2026 before easing in 2027. It has also warned that governments face challenges from rising public debt and limited room for policy responses as borrowing costs remain high.
For India, sustaining growth will depend on domestic economic momentum continuing amid these external pressures. The latest IMF assessment nevertheless places the country at the forefront of major-economy growth in 2026, with its projected expansion remaining substantially above that of the United States, China and Japan.
