New Delhi: India will continue to be the world’s fastest growing major economy with projected growth rates of 6.4% each in 2026-27 and 2027-28, the International Monetary Fund said in its latest World Economic Outlook (WEO) update. IMF has also made an upward revision to its 2025-26 growth forecast for India to 7.3% in keeping with the first advance estimates issued by the National Statistics Office (NSO) earlier this year. NSO numbers have projected a 7.4% GDP growth in 2025-26.
“In India, growth is revised upward by 0.7 percentage point to 7.3 percent for 2025 (2025-26), reflecting the better-than-expected outturn in the third quarter of the year and strong momentum in the fourth quarter. Growth is projected to moderate to 6.4 percent in 2026 and 2027 as cyclical and temporary factors wane”, IMF’s January update to its 2025 October WEO report said. “Inflation in India is expected to go back to near target levels after a marked decline in 2025 driven by subdued food prices”, the report said, in line with institutional forecasts such as RBI’s.
IMF’s latest projections have no real surprises as far as growth for the global economies and other major economies is concerned as well. Global GDP growth is expected at 3.3% in 2025, same as 2024 and also in 2026.
Among other major economies, the US and China are expected to grow at 2.1% and 5% in 2025 and 2.4% and 4.5% in 2026, respectively.
Unchanged growth forecasts, however, do not mean that the world economy is stable, the report cautions. “This steady performance on the surface results from the balancing of divergent forces. Headwinds from shifting trade policies are offset by tailwinds from surging investment related to technology, including artificial intelligence (AI), more so in North America and Asia than in other regions, as well as fiscal and monetary support, broadly accommodative financial conditions, and adaptability of the private sector…Risks to the outlook remain tilted to the downside”, the report said, highlighting a host of factors which could inflict a shock to the system.
It also warned of an AI bubble.
“Should expectations about AI-driven productivity gains turn out to be overly optimistic and outcomes disappoint, a sharp drop in real investment in the high-tech sector as well as in spending on AI adoption in other sectors and a more prolonged correction in stock market valuations—which have increasingly been lifted by only a few technology firms—could ensue. The rapid obsolescence of unused or misaligned assets, costly reallocation of capital and labour accompanied by a decline in business dynamism, and negative wealth effects would weigh on private consumption and investment. Spillovers would spread, directly through trade flows, to export-oriented economies specializing in technology products. These would radiate to the rest of the world through the tightening of global financial conditions. The impact on growth is highly uncertain and depends on how financial conditions react”, the report said.
