India’s economy is expected to grow faster than earlier predicted, even as it faces new trade barriers from the United States. The International Monetary Fund (IMF) has revised India’s 2025–26 GDP growth projection upward to 6.6%, compared to its earlier estimate of 6.4%. This increase reflects a stronger-than-anticipated economic performance in the first quarter, which has helped buffer the impact of higher US tariffs on Indian imports.
Why the 2025 Forecast Was Upgraded
- The IMF attributes the improved outlook to a carryover effect from robust early-quarter activity.
- This performance was strong enough to offset the negative effects of increased US tariffs that came into effect in July 2025.
- India’s domestic demand, particularly in consumption and services, remains solid.
- Combined with policy continuity and infrastructure push, this helped the economy maintain momentum even in the face of external trade disruptions.
What’s Behind the 2026 Downgrade
- While 2025 looks optimistic, the IMF has trimmed India’s 2026–27 growth forecast to 6.2%, a 20-basis-point drop from earlier projections.
This downward revision is due to several concerns,
- The full impact of US tariffs could materialize later, especially if trade volumes weaken.
- Global economic uncertainty, including tighter financial conditions and potential trade tensions, may limit investment and export demand.
- There’s a risk that front-loaded exports to avoid tariffs may slow down in subsequent quarters, creating a lag effect.
Global Economic Backdrop
- The IMF has also revised global growth upward to 3.2% in 2025, up from 3.0% projected in July. However, growth in 2026 is expected to remain steady at 3.1%.
- While recent trade shocks were less severe than feared, renewed threats of a US-China trade war—as hinted at by former US President Donald Trump—pose significant risks.
- These broader global tensions could weaken external demand, disrupt supply chains, and create uncertainty in global capital flows, all of which would have indirect effects on India and other emerging markets.
Static Facts
- India’s 2025–26 GDP growth: Revised up to 6.6%
- India’s 2026–27 GDP growth: Revised down to 6.2%
- US tariffs on Indian goods: Raised from July 2025
- Global GDP growth forecast for 2025: 3.2%
- Global GDP forecast for 2026: 3.1%