The International Monetary Fund has revised India’s growth forecast for Fiscal Years 2025-26 and 2026-27 down by 30 and 20 basis points, respectively, due to increasing global trade tensions.
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With rising global trade tensions, the International Monetary Fund (IMF) on Tuesday lowered the growth forecast for India during Fiscal Years 2025-26 (FY26) and 2026-27 (FY27) by 30 basis points (bps) and 20 basis points, respectively. This is lower than the global growth projection, where the dip is estimated at up to 50 basis points.
“For India, the growth outlook is relatively more stable at 6.2 percent in 2025 (Fiscal Year 2025-26), supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage point lower than that in the January 2025 WEO Update on account of higher levels of trade tensions and global uncertainty,” IMF said in its annual publication ‘World Economic Outlook.’
In January, it had a projected growth rate of 6.5 per cent for both FY 26 and FY 27. Now, the growth is expected to be 6.2 per cent for current fiscal and 6.3 per cent for next fiscal. The growth projection for the current fiscal is lower than the Reserve Bank of India’s (RBI) forecast of 6.5 per cent announced earlier this month, reduced from 6.7 per cent. However, it is similar to the forecast range of the lower band (6-3-6.8 per cent) given by the Economic Survey.
Immediately after US President Donald Trump announced the reciprocal tariff on April 2, various agencies cut their projections. Morgan Stanley said it sees a downside risk of 30-60bps to its growth estimate of 6.5 per cent for F26. EY India feels GDP growth may come down to 6 per cent as against the expectation of 6.5 per cent in 2025-26 if India does not respond with suitable policies to neutralise this adverse impact.
Forecast for China, US
As the tariff war is focused on the US and China, growth in both economies is expected to see a deeper impact. For China, the IMF has revised 2025 GDP growth downward to 4 per cent from 4.6 per cent in the January 2025 projection. “This reflects the impact of recently implemented tariffs, which offset the stronger carryover from 2024 (as a result of a stronger-than-expected fourth quarter) and fiscal expansion in the budget,” the multilateral agency said.
For the United States, growth is projected to decrease in 2025 to 1.8 per cent, 1 percentage point lower than the rate for 2024 as well as 0.9 percentage point lower than the forecast rate in the January 2025 WEO Update. “The downward revision is a result of greater policy uncertainty, trade tensions, and a softer demand outlook, given slower-than-anticipated consumption growth,” IMF said.
Global Growth Forecast
For the global number, the IMF has used two references. “Our World Economic Outlook’s reference forecast includes tariff announcements between February 1 and April 4 by the US and countermeasures by other countries. This reduces our global growth forecast to 2.8 percent and 3 percent this year and next, a cumulative downgrade of about 0.8 percentage point relative to our January 2025 WEO update,” it said. Further, it also presented a global forecast excluding the April tariffs (pre-April 2 forecasts). Under this alternative path, “global growth would have seen only a modest cumulative downgrade of 0.2 percentage point, to 3.2 percent for 2025 and 2026,” it said.
Published on April 22, 2025
