IMF Cuts India's GDP Forecast To 6.2% For FY26; Estimates Lower Than RBI; What To Know

The International Monetary Fund (IMF) has trimmed its forecast for India's GDP growth to 6.2% for FY26, down by 3 basis points from its earlier prediction of 6.5%. The IMF cited global uncertainties and trade tensions as key reasons behind the prediction; however, it still found India's growth outlook to be relatively stable compared to other economies. Noteworthy, the current GDP prediction of the IMF is lower than RBI's estimates for the financial year 2025-26.

In the latest World Economic Report (WGC) for April 2025, the IMF predicts a 6.3% growth rate in India for 2026, which is also down by 2 basis points from its previous outlook that was announced in January.

"For India, the growth outlook is relatively more stable at 6.2 per cent in 2025, supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage points lower than that in the January 2025 WEO Update on account of higher levels of trade tensions and global uncertainty," IMF said.

In its April policy, RBI predicted GDP growth of 6.5% for the financial year 2025-26, with a Q1 growth rate of 6.5%; Q2 at 6.7%; Q3 at 6.6%; and Q4 at 6.3%.

To back up its prediction, RBI said, going forward, sustained demand from rural areas, an anticipated revival in urban consumption, expected recovery of fixed capital formation supported by increased government capital expenditure, higher capacity utilisation, and healthy balance sheets of corporates and banks are expected to support growth. Merchandise exports would be weighed down by the evolving global economic landscape which appears to be uncertain at the current juncture, while services exports are expected to sustain the resilience. On the supply side, while agricultural prospects appear bright, industrial activity continues to recover, and services sector is expected to be resilient. Headwinds from global trade disruptions continue to pose downward risks.

During Q3 of FY25, India's GDP growth came in at 6.5%, expanding sharply from 5.6% of the previous month.

Post Q3 rate, Trading Economics highlighted that the rate consolidated the softening in India's GDP growth, which was by far the fastest growing economy in the G20 up until last year, following a prolonged period of high energy and food prices, in addition to restrictive monetary policy and tight liquidity conditions by the RBI. Growth increased for private consumption expenditure (6.9% vs 5.9% in September quarter) and public expenditures (8.3% vs 3.8%), but slowed for gross fixed capital formation (5.7% vs 5.8%). In the meantime, net external demand contributed positively to the GDP as exports soared by 10.4% and imports softened by 1.1%

The NSO has estimated real GDP growth rate at 6.5% for FY25-end.