IMF Cuts India’s Growth Forecast to 6.2% in FY26 Amid Tariff Uncertainty

The International Monetary Fund (IMF) has revised India’s GDP growth forecast for the fiscal year 2025-26 (FY26) down to 6.2%, citing trade tensions and the US tariffs on imports from India as key reasons for this adjustment. This reduction in India’s growth forecast follows a broader pattern of downward adjustments to global growth projections. Despite these challenges, India is still expected to experience higher growth than both emerging and advanced economies, with the IMF noting that it is better positioned to handle the global slowdown compared to other nations.

Key Insights

Revised Growth Projections for India

• FY26 GDP Growth Forecast: Revised down to 6.2% from 6.5% previously
• FY27 GDP Growth Forecast: Reduced to 6.3% from 6.5%
• Impact of Tariffs: The reduction in growth projections is primarily attributed to the 26% tariff imposed by the United States on imports from India and trade tensions.

Global Growth Impact

• The global growth projection for 2025 has been revised down to 2.8%, down from 3.3% in earlier forecasts.
• Tariffs’ Effect on Inflation: The global inflation outlook has been worsened by tariff impositions, contributing to slower economic performance worldwide.

India’s Position Amid Global Slowdown

• Despite the downward revision in growth, India’s economic outlook remains the strongest among both emerging markets and advanced economies.
• Relatively Stable Growth in 2025: India’s economic stability in 2025 is supported by strong domestic consumption, particularly in rural areas, which is expected to cushion the country from the global downturn.

Comparison with Other Global Economies

• China’s GDP Growth Forecast: Downgraded to 4% from 4.6%.
• US GDP Growth Forecast: Reduced to 1.8% from 2.7% as per the latest World Economic Outlook (WEO) update.

Tariffs and Their Impact

• Countries directly impacted by tariffs, like the US and China, are projected to be the most affected.
• Medium-Term Effects: Economies in Asia and Europe are also expected to feel the impact of tariff impositions over time, affecting inflation and economic performance.