IMF Raises Growth View, With Caution

India to grow 6.4% in FY26, tariffs to erode output: IMF

- Rhik Kundu

Resilience in large economies prompted the International Monetary Fund (IMF) to nudge its forecast for global growth higher on Tuesday, even as it warned that the recovery remains vulnerable to policy uncertainty and trade tensions. Still, the IMF flagged significant risks, warning that if US tariffs rise again after 1 August without new agreements, global output could shrink, exposing the fragile nature of the recovery.

The world economy may expand by 3% in 2025 and 3.1% in 2026, the IMF said in the July update to its World Economic Outlook (WEO), up 0.2 and 0.1 percentage points respectively from its April forecast. The IMF also raised its FY26 growth forecast for India to 6.4%, up from 6.2%, and revised its FY27 projection to the same level, citing sustained domestic resilience and a more favourable external backdrop. It maintained its FY25 growth estimate at 6.5%, underscoring the economy's strength despite global headwinds.

The forecast comes amid the turmoil unleashed by US President Donald Trump's decision to impose tariffs on friends and foes alike, sparking trade wars and hasty deals.