India’s 7% growth outlook stands out as IMF sees global economy expanding 3.1%

India’s economy is projected to grow 7 per cent in each of the next two fiscal years, outpacing a global economy expected to expand by 3.1 per cent in 2026, as resilient domestic demand and services activity strengthen the country’s growth outlook, according to the International Monetary Fund (IMF).

In its October 2026 World Economic Outlook (WEO), the IMF raised its estimate for India’s growth in FY27 from 6.4 per cent projected in July to 7 per cent. Its forecast for FY28 was also revised upwards to 7 per cent from 6.7 per cent.

The IMF also pointed to favourable demographic trends, an expanding domestic market and continued structural reforms as factors supporting India’s growth potential.

India’s growth outlook outpaces the global economy

The IMF projects global economic growth at 3.1 per cent in 2026, marginally higher than its July estimate of 3 per cent. The global economy expanded by 3.5 per cent in 2025.

For 2027, the Fund expects global growth to reach 3.4 per cent, unchanged from its July forecast.

India’s stronger domestic demand and services activity have helped support its growth prospects despite these external pressures.

Domestic demand and services support India’s expansion

Consumption and services have been important sources of growth, helping the economy maintain momentum despite uncertainties in international markets.

More from Business

A large domestic market provides an important source of demand, while favourable demographics and structural reforms are among the factors underpinning the country’s longer-term growth potential.

The IMF expects India to maintain growth of 7 per cent across FY27 and FY28, indicating that the current momentum could extend into the next fiscal year.

The Reserve Bank of India (RBI) has also projected growth of 7.1 per cent for FY27, slightly above the IMF’s estimate.

Higher crude oil prices remain a key risk

Despite the stronger growth outlook, rising energy costs remain a potential source of pressure for India, which relies heavily on imports to meet its crude oil requirements.

The IMF’s October outlook assumes an average crude oil price of $95.74 per barrel in 2026, an increase of about 41 per cent from 2025. It expects the average to ease to $87.39 per barrel in 2027.

Sustained high oil prices could increase India’s import bill, put pressure on the current account balance and add to domestic inflation. They could also affect household purchasing power and raise input costs for businesses.

The IMF projects India’s consumer inflation at 5 per cent in FY27 before easing to 4.4 per cent in FY28. The current account deficit is expected to widen to 1.5 per cent of gross domestic product in FY27.

Global growth faces an uneven outlook

The IMF expects global inflation to reach 4.7 per cent in 2026, driven largely by higher energy and food prices, before moderating to 4.1 per cent in 2027.

The outlook also reflects differences in the performance of major economies. While investment linked to artificial intelligence has supported activity in parts of the global economy, the benefits have not been evenly distributed.

Geopolitical tensions and the possibility of further energy price increases remain risks to growth and inflation.

Against this backdrop, India’s upgraded growth forecast stands out. The challenge will be to sustain domestic economic momentum while containing inflation and limiting the impact of global disruptions on trade, investment and household spending.