Washington: The International Monetary Fund on Monday raised India’s economic growth projection for 2025 by a sharp 0.7 percentage point to 7.3 per cent, citing stronger-than-expected performance in the second half of the year, even as it expects growth to moderate in the coming years. 

In its World Economic Outlook Update, the IMF said the upward revision reflects a “better-than-expected outturn in the third quarter of the year and strong momentum in the fourth quarter,” underscoring India’s position as one of the fastest-growing major economies in the world.

The IMF projected that India’s growth would ease to 6.4 per cent in 2026 and 2027 as cyclical and temporary factors wane.

Despite the expected moderation, India remains a key driver of growth among emerging market and developing economies, which the IMF said are projected to expand at just over 4 per cent in 2026 and 2027. 

Emerging and developing Asia continues to benefit from strong technology-related investment and trade, even as global momentum becomes uneven.

The update noted that global growth is projected to hold steady at 3.3 per cent in 2026, supported by easing trade tensions, accommodative financial conditions and a surge in investment linked to technology, particularly artificial intelligence.

Inflation trends were also favourable for India. The IMF said inflation in India “is expected to go back to near target levels after a marked decline in 2025, driven by subdued food prices,” offering additional support to domestic demand.

However, the IMF cautioned that risks to the outlook remain tilted to the downside. A reassessment of expectations around AI-driven productivity gains could lead to a pullback in investment and tighter global financial conditions, with spillover effects for emerging economies.

On the upside, the Fund said faster adoption of artificial intelligence could lift global growth, provided productivity gains materialise, and financial risks are contained.