IMF Cuts India FY27 GDP Growth Forecast by 20bps

The International Monetary Fund (IMF) recently revised India’s GDP growth projections. It raised the forecast for the current fiscal year 2025-26 to 6.6 per cent but lowered the estimate for 2026-27 to 6.2 per cent. This follows a similar cut by the World Bank. The Reserve Bank of India (RBI) remains more optimistic with a 6.8 per cent forecast for 2025-26 and 6.6 per cent for 2026-27. Key factors affecting these revisions include higher US tariffs on Indian imports and global trade uncertainties.

Recent Growth Trends and Forecasts

India’s GDP grew by 7.8 per cent in the April-June quarter of 2025, exceeding expectations. This strong start led to an upward revision of growth estimates for the current fiscal year. However, growth for 2026-27 faces downward pressure due to external trade challenges and tariff increases.

Impact of US Tariffs on India

The US has imposed tariffs up to 50 per cent on Indian goods since mid-2024. This move has introduced uncertainty in trade relations. While the immediate impact on India’s growth has been modest, economists warn of risks if no bilateral trade agreement is reached. The tariffs affect prices, investment, and consumption patterns in India.

IMF’s View on Global Trade and Economy

The IMF notes that the global impact of tariff hikes remains limited due to exemptions and alternative trade arrangements. Countries have adapted by rerouting supply chains and front-loading imports. Despite this, the IMF cautions that the tariff shock still poses risks to global growth.

Comparative Growth Outlook for Major Economies

The IMF raised global growth forecasts for 2025 to 3.2 per cent but kept 2026 steady at 3.1 per cent. The US economy is expected to grow at 2 per cent in 2025 and 2.1 per cent in 2026. Japan’s growth is forecast at 1.1 per cent and 0.6 per cent respectively. China’s growth remains stable at 4.8 per cent for 2025 and 4.2 per cent for 2026, despite export shifts from the US to other regions like the euro area and ASEAN.

Trade Realignments and Bilateral Relations

China’s export decline to the US has been partially offset by increased trade with other partners. The renminbi’s depreciation against most currencies except the US dollar has supported this shift. The IMF marks that US-China trade decoupling is accelerating compared to the 2018-19 tariff tensions, signalling changing global trade dynamics.