IMF upgrades India's FY27 GDP forecast to 6.5% amid global risks

The IMF upgraded India's FY27 GDP forecast to 6.5%, citing a strong 2025 outturn. However, it warned that the ongoing Middle East conflict could weigh on global momentum, push inflation higher, and disrupt key energy markets.

The International Monetary Fund on Tuesday slightly upgraded India's GDP growth forecast for FY27 to 6.5 per cent, revising its upward by 0.1 percentage point from its January projection. It also warned that escalating geopolitical tensions, particularly the ongoing conflict in the Middle East, could weigh on global economic momentum and push inflation higher.

Releasing the data in its latest outlook, the IMF stated "For 2026, growth is revised upward moderately by 0.3 percentage point (0.1 percentage point relative to January) to 6.5 percent, led by positive contributions from the carryover of the strong 2025 outturn and the decline in additional US tariffs on Indian goods from 50 to 10 percent, which outweigh the adverse impact of the Middle East conflict. Growth is projected to stay at 6.5 per cent in 2027."

According to the IMF, India's growth outlook remains strong despite global uncertainties. Growth for 2025 has been revised upward by 1.0 percentage point compared to October estimates to 7.6 per cent, reflecting better-than-expected performance in the second and third quarters of the fiscal year, along with sustained momentum in the fourth quarter.

Global Economy Faces Fresh Challenges

However, the IMF cautioned that the global economy is facing fresh challenges due to the military conflict in the Middle East, which began at the end of February. While the global economy has shown resilience to multiple shocks so far, the ongoing conflict is testing that stability.

Pressure on Public Finances

The report noted that the conflict is putting additional pressure on public finances across countries. Governments are facing rising costs due to direct impacts of the conflict, while also attempting to shield vulnerable populations from rising commodity prices. At the same time, higher financing costs and weaker economic activity are affecting revenues.

Impact on Global Energy Markets

The IMF also highlighted the impact of the conflict on global energy markets. Oil prices have surged significantly, rising 57.6 per cent between August 2025 and March 2026 to USD 105.8 per barrel. The spike was driven by disruptions in oil shipments through the Strait of Hormuz, a key global supply route.

The stoppage of shipments through the Strait curtailed about 8.5 million barrels per day of crude oil exports. Typically, around 20 million barrels per day, equivalent to 20 per cent of global oil consumption, flow through this route, including 15 million barrels per day of crude oil.

In addition, major oil-producing facilities were shut down either as a precaution or due to storage and infrastructure damage, further tightening global supply. The disruptions have also pushed up natural gas prices in Europe and Asia. (ANI)

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