CHENNAI: The International Monetary Fund on Monday projected a sharp moderation in India’s economic growth in the next fiscal year, signalling that the country’s expansion is likely to slow after a strong current-year performance. The IMF said India’s GDP growth is expected to ease to 6.4% next year, down from its estimate of 7.3% for 2025-26, underscoring a shift from cyclical strength to a more measured pace of expansion.
The projection comes just days after the World Bank maintained its own forecast of 6.5% growth for India, pointing to a broad convergence among global institutions that the economy may be entering a phase of gradual deceleration.
In its latest assessment, the IMF attributed the expected slowdown largely to the fading of temporary growth drivers that have supported the economy in recent years. Strong post-pandemic recovery dynamics, resilient consumption and elevated public capital expenditure have helped India outperform many major economies, but these factors are expected to lose some momentum over time. As demand normalises and base effects wear off, growth is projected to return closer to what the fund sees as India’s medium-term potential.
The IMF noted that domestic demand will continue to anchor growth, but at a less accelerated pace. Private consumption is likely to remain supported by rising incomes and easing inflationary pressures, though it may not replicate the buoyancy seen during the current fiscal year. Investment activity is also expected to stay steady, helped by ongoing infrastructure spending and policy continuity, but global uncertainties could temper private sector risk appetite, particularly in export-oriented and capital-intensive segments.
External conditions form a key part of the IMF’s more cautious outlook. Sluggish global growth, persistent geopolitical tensions and uncertainty around trade and financial conditions could weigh on India’s export performance and capital flows. While India’s large domestic market offers a degree of insulation, the fund cautioned that a weaker external environment could still have indirect effects through investment sentiment and supply chains.
Inflation dynamics were seen as a relative positive in the IMF’s assessment. With price pressures expected to remain broadly within the central bank’s tolerance band, monetary policy is likely to focus on supporting macroeconomic stability rather than aggressively tightening. This, the fund suggested, could help smooth the transition to a slower but more sustainable growth trajectory.
The IMF’s forecast broadly aligns with the World Bank’s view that India’s growth will moderate but remain among the strongest globally. Together, these projections suggest that while India is unlikely to sustain growth above 7 per cent indefinitely, it is still positioned to expand at a pace well above most major economies. The emphasis, however, is shifting from short-term acceleration to medium-term sustainability.
From an analytical perspective, the projected slowdown highlights the challenge facing policymakers as India seeks to balance growth with stability. Continued public investment and structural reforms will be critical to prevent a sharper deceleration and to lift potential growth over the longer term. At the same time, managing fiscal pressures, strengthening job creation and improving productivity will be essential to ensure that slower headline growth does not translate into weaker economic confidence.
Overall, the IMF’s latest outlook reflects a recalibration rather than a reversal of India’s growth story. The forecast decline to 6.4% signals the end of a period of exceptional momentum, but it also reinforces the view that India’s economy is transitioning toward a more durable and balanced expansion path, even as global conditions remain uncertain.