The International Monetary Fund (IMF) has cut India’s growth projection by 30 basis points (bps) to 6.2% for FY26, citing higher trade tensions and global uncertainty, even as the multilateral agency cut the world GDP growth by a sharper 50 bps to 2.8% for 2025. The IMF also cut India’s growth projection by 20 bps to 6.3% for FY27.
The IMF said the “near-universal” US tariffs, which raised effective tariff rates to levels not seen in a century, on its own is a major negative shock to world growth. The US had announced hefty “reciprocal tariffs” on most countries; while these have since been put in abeyance for 90 days, additional base line tariff of 10% is in place for most countries, with China facing prohibitive impost of up to 145%.
“For India, the growth outlook is relatively more stable at 6.2% in 2025 (FY26), 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 its latest World Economic Outlook.
The US and China were among the countries to see the biggest downgrades. For China, 2025 GDP growth is revised downward by 60 bps to 4% for 2025 and by 50 bps to 4% in 2026, reflecting the impact of recently implemented tariffs. The US is forecast to grow 1.8% in 2025 and 1.7% in 2026, a cut of 0.9 and 0.4 percentage points, respectively. The IMF also increased its forecast for US inflation in 2025 by roughly one percentage point to 3%.
The multilateral agency projected India’s consumer price inflation to be 4.2% in FY26 and 4.1% in FY27. Current account deficit at 0.9% of GDP in FY26 and 1.4% in FY27. Unemployment is estimated to remain static at 4.9%.
“Since the release of the January 2025 WEO Update, a series of new tariff measures by the United States and countermeasures by its trading partners have been announced and implemented, ending up in near-universal US tariffs on April 2 and bringing effective tariff rates to levels not seen in a century. This on its own is a major negative shock to growth,” IMF said.
In its monetary policy committee meeting on April 9, the RBI cut the repo rate by 25 basis points to 6%, taking the cumulative cut in the last two MPC meetings to 50 bps. The MPC also decided to change the stance from neutral to accommodative. RBI has slashed its inflation projection for FY26 by 20 bps to 4%.
The IMF cut its projection for global output growth this year to 2.8%, down from its January forecast of 3.3% and would be the slowest expansion of gross domestic product since the Covid-19 pandemic in 2020. It reduced its estimate for next year to 3%, a drop of 0.3 percentage points.
Commenting on the ageing population, it said India, with its relatively favourable near-term demographics, is projected to experience a smaller growth decline in 2025–50 (of about 0.7 percentage point), but the decline will intensify over 2050–2100 as the country passes its demographic turning point. On the other hand, China will witness a particularly sharp decline in its GDP growth over 2025–50—a deceleration of 2.7 percentage points relative to the 2016–18 average—reflecting acutely adverse demographics, as well as the approaching end of the era of rapid catch-up to frontier productivity.