After World Bank, IMF also cuts India’s FY27 GDP growth forecast by 20 bps
October 14, 2025
Even as it cut next year’s growth forecast, the IMF sees India growing 6.6% in the current fiscal, up from 6.4% it had previously projected. This is lower than the RBI's projection of 6.8%.
At 6.6 per cent and 6.2 per cent, the IMF’s revised growth forecasts for India for the current and next year are lower than that of the Reserve Bank of India (RBI). On October 1, the RBI had raised its forecast for 2025-26 by 30 bps to 6.8 per cent. Meanwhile, its six-monthly Monetary Policy Report said that assuming a normal monsoon and no major external or policy shocks, GDP growth in 2026-27 is seen at 6.6 per cent.
“Compared with the July WEO Update, this is an upward revision for 2025, with carryover from a strong first quarter more than offsetting the increase in the US effective tariff rate on imports from India since July, and a downward revision for 2026. Compared with the pre-tariff forecast in October 2024, growth is projected to be cumulatively 0.2 percentage point lower,” the IMF said.
India’s higher-than-expected growth rate of 7.8 per cent in the April-June quarter has led to an upgrade in forecasts for the current year that will end in March 2026. However, with the US levying a total tariff of 50 per cent on Indian goods, economists see risks to the growth outlook for next year, especially if India does not manage to conclude a bilateral trade agreement with the world’s largest economy.
“Trade policy uncertainty remains elevated in the absence of clear, transparent, and durable agreements among trading partners – and with attention starting to shift from the eventual level of tariffs to their impact on prices, investment, and consumption,” the IMF said on Tuesday.
Tariff impact ‘smaller than expected so far’
According to Pierre-Olivier Gourinchas, the IMF’s Chief Economist, the good news six months on from the so-called Liberation Day of April 2 is that the growth fallout of the tariffs has been “at the modest end of the range” because the US has negotiated trade deals with several countries and provided multiple exemptions. Further, most countries have avoided retaliation, with companies front-loading imports and quickly re-routing supply chains.
“As a result, the increase in tariffs and its effect has been smaller than expected so far,” Gourinchas said. However, he added that it would be “both premature and incorrect” to conclude that the shock from the tariff surge has had no effect on global growth.
Like India, the IMF has increased its growth forecast for the global economy for 2025 by 20 bps to 3.2 per cent, although it retained the forecast for 2026 at 3.1 per cent.
The US is now expected to grow 10 bps faster in both 2025 and 2026, at 2 per cent 2.1 per cent, respectively. Japan is seen growing 40 bps faster now at 1.1 per cent in 2025 and 10 bps faster at 0.6 per cent in 2026. The IMF, however, has not made any changes to its GDP growth forecast for China, whose economy is seen continuing to grow by 4.8 per cent in 2025 and 4.2 per cent in 2026.
“In China, the decline in exports to the United States has been partly offset by higher exports to the euro area and countries in the Association of Southeast Asian Nations (ASEAN), in part supported by the depreciation of the renminbi against most currencies (excluding the US dollar). Bilateral trade decoupling between the United States and China appears to be happening sooner when compared with the 2018–19 tariff shock,” the IMF said.
“Compared with the July WEO Update, this is an upward revision for 2025, with carryover from a strong first quarter more than offsetting the increase in the US effective tariff rate on imports from India since July, and a downward revision for 2026. Compared with the pre-tariff forecast in October 2024, growth is projected to be cumulatively 0.2 percentage point lower,” the IMF said.
India’s higher-than-expected growth rate of 7.8 per cent in the April-June quarter has led to an upgrade in forecasts for the current year that will end in March 2026. However, with the US levying a total tariff of 50 per cent on Indian goods, economists see risks to the growth outlook for next year, especially if India does not manage to conclude a bilateral trade agreement with the world’s largest economy.
“Trade policy uncertainty remains elevated in the absence of clear, transparent, and durable agreements among trading partners – and with attention starting to shift from the eventual level of tariffs to their impact on prices, investment, and consumption,” the IMF said on Tuesday.
Tariff impact ‘smaller than expected so far’
According to Pierre-Olivier Gourinchas, the IMF’s Chief Economist, the good news six months on from the so-called Liberation Day of April 2 is that the growth fallout of the tariffs has been “at the modest end of the range” because the US has negotiated trade deals with several countries and provided multiple exemptions. Further, most countries have avoided retaliation, with companies front-loading imports and quickly re-routing supply chains.
“As a result, the increase in tariffs and its effect has been smaller than expected so far,” Gourinchas said. However, he added that it would be “both premature and incorrect” to conclude that the shock from the tariff surge has had no effect on global growth.
Like India, the IMF has increased its growth forecast for the global economy for 2025 by 20 bps to 3.2 per cent, although it retained the forecast for 2026 at 3.1 per cent.
The US is now expected to grow 10 bps faster in both 2025 and 2026, at 2 per cent 2.1 per cent, respectively. Japan is seen growing 40 bps faster now at 1.1 per cent in 2025 and 10 bps faster at 0.6 per cent in 2026. The IMF, however, has not made any changes to its GDP growth forecast for China, whose economy is seen continuing to grow by 4.8 per cent in 2025 and 4.2 per cent in 2026.
“In China, the decline in exports to the United States has been partly offset by higher exports to the euro area and countries in the Association of Southeast Asian Nations (ASEAN), in part supported by the depreciation of the renminbi against most currencies (excluding the US dollar). Bilateral trade decoupling between the United States and China appears to be happening sooner when compared with the 2018–19 tariff shock,” the IMF said.