Washington, November 26 (Udaipur Kiran): The International Monetary Fund (IMF) has projected a robust growth rate of 6.6 per cent for India in the financial year 2025–26 despite external challenges, including prolonged high US tariffs. The projection assumes a baseline scenario of continued 50 per cent US tariffs.

According to the IMF report released on Wednesday, India’s real GDP is expected to grow at 6.6 per cent in FY2025–26 before moderating to 6.2 per cent in FY2026–27. The report noted that India’s economy has continued to perform well, following a growth of 6.5 per cent in FY2024–25. Real GDP expanded by 7.8 per cent in the first quarter of FY2025–26.

Headline inflation has declined significantly due to subdued food prices. The financial and corporate sectors remain resilient, supported by adequate capital buffers and multi-year low non-performing assets. The report also said fiscal consolidation has progressed and the current account deficit remains contained, supported by strong service exports.

The IMF highlighted that reforms in the goods and services tax (GST) and the resulting reduction in the effective tax rate are expected to help cushion the adverse impact of tariffs. Headline inflation is projected to remain well contained due to the one-off impact of GST reform and continued benign food prices.

The report pointed out that while there are upsides such as new trade agreements and faster domestic reform implementation that could boost exports, investment and employment, there are also downside risks. These include deepening geoeconomic fragmentation, tighter financial conditions, higher input costs, lower trade and foreign investment, as well as weather-related risks affecting crop yields and rural consumption.

IMF Executive Directors commended India’s strong economic performance and resilience, attributing it to sound macroeconomic policies and reforms. They supported the government’s plan for continued fiscal consolidation, while stressing that achieving fiscal deficit targets would require strict spending discipline. They also welcomed the recent simplification of GST but advised careful monitoring of its fiscal impact.

The IMF supported the Reserve Bank of India’s data-dependent approach to monetary policy and said that if tariffs persist at current levels, there could be scope for further monetary easing amid benign inflation. It also recommended efforts to strengthen monetary transmission and greater exchange rate flexibility to help absorb external shocks.

Related