India’s Economy to Grow at 6.6% in 2025–26, Says IMF

India’s economic momentum continues to impress global observers, with the International Monetary Fund (IMF) projecting a 6.6% growth rate for fiscal year 2025–26. This estimate comes on the heels of 6.5% growth in FY 2024–25 and a robust 7.8% GDP expansion in Q1 of 2025–26, as confirmed in the IMF’s recent Annual Article IV Consultation with India.

Despite global economic uncertainties and rising trade tensions, India is expected to retain its position as one of the fastest-growing major economies, thanks to strong domestic demand, strategic reforms, and resilient policy frameworks.

GST Reforms to Offset External Trade Pressures

A critical insight from the IMF report is the stabilizing impact of Goods and Services Tax (GST) reforms, which are likely to cushion the Indian economy from external shocks, particularly the recent 50% tariff hike imposed by the US on select imports.

The IMF acknowledged that streamlining GST compliance, broadening the tax base, and improving coordination between the Centre and States have strengthened India’s fiscal landscape. These measures are expected to help the country absorb trade-related setbacks and continue driving growth from within.

Domestic Strength Amid Global Headwinds

While global trade slowdowns, geopolitical tensions, and high interest rates in advanced economies remain risk factors, India’s growth is projected to be powered by,

• Rising consumer demand
• Public infrastructure investments
• Digital transformation
• Formalisation of the economy
• Improved tax collection through GST and income tax digitisation

The 7.8% growth in Q1 of FY 2025–26 stands as a testament to India’s internal economic vitality and suggests that future quarters may also outperform expectations if structural bottlenecks are addressed.

IMF’s Prescription: Structural Reforms for Long-Term Growth

The IMF emphasized that India’s aspiration to transition into an advanced economy hinges on continuing its comprehensive structural reform agenda. These include,

• Labour market flexibility and ease of doing business
• Land acquisition reforms
• Education and health sector enhancements
• Skilling initiatives to match a modern workforce
• Financial sector deepening to improve credit access for MSMEs

Such reforms would help lift India’s potential growth rate, ensuring long-term economic sustainability beyond cyclical recovery.

Key Takeaways

• IMF projects 6.6% GDP growth for India in FY 2025–26.
• Q1 of FY 2025–26 recorded 7.8% GDP growth.
• GST reforms are helping India counter 50% US tariffs.
• Economic growth is backed by domestic demand, infrastructure, and digitalisation.
• Structural reforms needed in labour, land, health, education, and finance sectors.