India’s economic outlook for the current fiscal year has drawn a string of upward revisions from international and domestic agencies, with both the International Monetary Fund and the World Bank raising their growth projections in January 2026, even as they cautioned that a moderation lies ahead.
The IMF, in its January 2026 World Economic Outlook update, revised India’s FY2025-26 GDP growth forecast upward by 0.7 percentage points to 7.3 per cent, citing a better-than-expected performance in the third quarter — October to December — and strong momentum heading into the fourth. Business Standard The revision marked a significant upgrade from the Fund’s October 2025 estimate of 6.6 per cent for the same year.
The IMF said growth is projected to moderate to 6.4 per cent in FY2026-27 and FY2027-28, as cyclical and temporary factors supporting the current pace begin to wane. Business Standard
The World Bank moved in the same direction, though its report preceded the IMF’s by nearly a week. In its flagship Global Economic Prospects report, released in January 2026, the World Bank estimated India’s growth at 7.2 per cent in FY2025-26, attributing the revision to domestic demand remaining robust, reflecting strong private consumption supported by earlier tax reforms and improvements in real household earnings in rural areas. ThePrint The revised estimate represented an increase of 0.9 percentage points from the bank’s June 2025 projection of 6.3 per cent.
The World Bank noted that despite higher US tariffs on certain Indian exports, the growth forecast was maintained relative to June projections, primarily because the adverse impacts of those tariffs would be offset by stronger momentum in domestic demand and more resilient exports than previously anticipated. The US accounts for about 12 per cent of India’s merchandise exports. ThePrint
Growth in India is projected to slow to 6.5 per cent in FY2026-27 before inching up to 6.6 per cent in FY2027-28, underpinned by robust services activity as well as a recovery in exports and a pickup in investment, the bank said. It added that India is expected to maintain the fastest growth rate among the world’s largest economies. ThePrint
Domestic Estimates: RBI and NSO
India’s own institutions have placed the FY26 growth estimate marginally higher than the multilateral lenders.
The National Statistical Office, under the Ministry of Statistics and Programme Implementation, released its First Advance Estimates on January 7, 2026, projecting real GDP growth at 7.4 per cent for FY2025-26. Real GDP at constant 2011-12 prices is estimated at Rs 201.90 lakh crore, up from Rs 187.97 lakh crore in FY2024-25. Ministry of Statistics and Programme ImplementationAffairsCloud Nominal GDP growth — which incorporates inflation — is forecast at 8.0 per cent for the year. The NSO’s First Advance Estimates serve as a primary input for Union Budget formulation.
The Reserve Bank of India’s Monetary Policy Committee, in its February 6, 2026 meeting chaired by Governor Sanjay Malhotra, affirmed that real GDP is set to grow at 7.4 per cent in FY26, consistent with the NSO’s estimate. Business Standard The RBI slightly increased its GDP growth estimate for FY26 from 7.3 per cent to 7.4 per cent — a cumulative upward revision of 90 basis points across the last three policy meetings. India Infoline The MPC simultaneously held the repo rate unchanged at 5.25 per cent, maintaining a neutral stance.
The RBI noted that FY26 growth was supported by strong private consumption and fixed investments, and said that trade pacts with the EU and the US bode well from an external demand perspective. However, it cautioned that the still-uncertain global trade environment and volatility in financial and commodity markets pose risks to the growth outlook.
Key Drivers
The services sector is estimated to grow at 9.1 per cent in GVA terms in FY26, up from 7.2 per cent in FY2024-25, with financial, real estate, and professional services leading the advance. The manufacturing sector is expected to post 7.0 per cent GVA growth, up from 4.5 per cent the previous year.
Private Final Consumption Expenditure at constant prices is estimated to grow at 7.0 per cent in FY26, while Gross Fixed Capital Formation — a measure of investment — is projected to expand at 7.8 per cent, against 7.1 per cent in FY25.
A significant methodological revision also deserves mention. The Ministry of Statistics and Programme Implementation, in late February 2026, released a new national accounts series with a base year of 2022-23, replacing the earlier 2011-12 base series. Under the revised framework, India’s GDP growth for FY2025-26 was estimated at 7.6 per cent, compared to the 7.4 per cent figure under the old series. The new series incorporates updated data sources and improved estimation methodology; comparisons between the two series should be made with caution.
Risks and Moderating Factors
Both international agencies and the RBI have flagged risks that could compress the growth trajectory in FY2026-27 and beyond. India is facing a 50 per cent tariff from the United States, affecting labour-intensive sectors such as textiles, footwear, and marine products. Business Today The IMF’s FY27 projection of 6.4 per cent explicitly assumes that these cyclical supports will progressively fade.
The United Nations’ World Economic Situation and Prospects 2026 report, released separately, projected India’s growth would moderate from an estimated 7.4 per cent in FY25 to 6.6 per cent in calendar year 2026, noting that exports may face headwinds from higher US tariffs, though key export segments are likely to remain exempt and strong demand from other major markets is expected to partially offset the impact.
Inflation, which has fallen sharply in the current fiscal, remains a watch factor. Headline CPI inflation stood at 1.33 per cent in December 2025, well below the RBI’s 2-6 per cent target band. However, the RBI has projected a rebound to 3.2 per cent in Q4 FY26 and 4.0 per cent in Q1 FY27. A revision in the CPI methodology — reducing the weightage assigned to food items — is expected to affect reported inflation figures from FY27 onwards.
Outlook
Across both international and domestic assessments, FY2025-26 is shaping up as a year of stronger-than-anticipated growth, anchored in domestic consumption and services sector performance. The consensus estimate of around 7.4 per cent from India’s own statistical authorities exceeds the IMF and World Bank projections by a modest margin, reflecting differing assumptions about external headwinds.
What the forecasts collectively underline is that the growth trajectory is expected to step down in FY2026-27, with most agencies converging on a range of 6.4 to 6.7 per cent for that year. Whether India sustains growth near the upper end of that range will depend significantly on the evolution of global trade policy, commodity prices, and domestic investment momentum — factors that remain in flux.
