IMF projects India’s GDP growth at 7.3% in 2025–26, remaining the world’s fastest-growing major economy with steady 6.4% growth through 2028.

In its latest World Economic Outlook (WEO) update, released ahead of the upcoming Union Budget, the International Monetary Fund (IMF) projected that India will remain the world’s fastest-growing major economy. Growth is forecast at 6.4% for 2026–2027 and 2027–2028, while the IMF has revised India’s growth estimate for 2025–2026 upward to 7.3%, aligning closely with the National Statistics Office (NSO) projection of 7.4%.

The upward revision reflects stronger-than-expected performance in the third quarter of 2025 and robust momentum in the fourth quarter. As cyclical factors normalize, growth is expected to moderate to 6.4% over the next two years. Inflation in India is projected to return near target levels in 2025, aided by subdued food prices, according to the IMF.

Global Outlook and Major Economies

The IMF maintained its global GDP growth forecast at 3.3% for 2025, consistent with prior projections for 2024–2026. Among major economies, the US is expected to grow at 2.1% in 2025 and 2.4% in 2026, while China is projected to expand by 5% in 2025 and 4.5% in 2026.

However, the IMF cautioned that steady global growth does not imply stability. Supportive factors—such as rising technology investment, accommodative fiscal and monetary policies, and private sector adaptability—are counterbalanced by trade uncertainties, geopolitical risks, and other headwinds.

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AI Bubble and Investment Risks

The report highlighted concerns about an AI-driven investment bubble. Overly optimistic expectations of AI productivity gains could trigger a decline in high-tech investments, slower AI adoption in other sectors, stock market corrections, and underutilized assets. This could reduce private consumption, hamper investment, disrupt labor and capital allocation, and negatively impact wealth. Export-oriented economies dependent on technology could face spillover effects, and global financial tightening could amplify risks worldwide.

Call for Coordinated Global Policies

To support sustainable medium-term growth, the IMF emphasized the need for internationally coordinated policies. Measures suggested include:

• Strengthening the EU single market

• Implementing credible fiscal consolidation to reduce US public debt

• Advancing reforms in China to enhance social protection and reduce excessive industrial support

Such steps would help diversify sources of global growth while mitigating risks from trade disputes and geopolitical developments.