IMF cuts India's FY26 growth forecast to 6.2% amid trade tensions; global forecast slips to 2.8%

The global multilateral lending agency IMF (International Monetary Fund), in its latest update to the World Economic Outlook (WEO) 2025, has slashed its FY26 growth forecast for India by 30 basis points to 6.2% from 6.5% amid trade tensions and global uncertainty. "For India, the growth outlook is relatively more stable at 6.2 per cent in 2025 (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," the IMF said in its WEO update.

In its broader forecast for the country, the IMF says India will see a marginal decline of 0.7 percentage points in growth from the years 2025-50, thanks to its favourable near-term demographics, while the decline will be seen from 2050-2100.

The IMF latest projections on the Indian economy are closer to what the central government's Economic Survey 2025 has projected, with the growth estimate of 6.3-6.8%. The Reserve Bank of India’s Monetary Policy Committee (MPC) this month also lowered the GDP growth forecast for 2025–26 by 20 basis points from its February estimate, revising it to 6.5%.

On the global front, the latest WEO forecasts the global growth to decline to 2.8% in 2025 and 3% in 2026. The IMF says the world economy is entering a new era, amid tariffs and rising uncertainty. "Our WEO (the World Economic Outlook) revises down global growth to 2.8% in 2025 with trade growth slowing to just 1.7%. Inflation is revised up by about 0.1 percentage point," says the global financial body.

'US tariffs have reset the global economic system'

The IMF has said that without the April tariffs, its global growth forecast would be "fairly similar" to that projected in January. "Under the tariffs, global growth is projected to slow down significantly but remain above recession levels."

The global body says the global economic system under which most countries have operated for the last 80 years is being reset, ushering the world into a new era. "Existing rules are challenged while new ones are yet to emerge. Since late January, a flurry of tariff announcements by the United States, which started with Canada, China, Mexico and critical sectors, culminated with near-universal levies on April 2."

It adds that the US effective tariff rate "surged past levels reached during the Great Depression", while counter-responses from major trading partners "significantly" pushed up the global rate. "The resulting epistemic uncertainty and policy unpredictability are a major driver of the economic outlook."

The global body has warned that if sustained, this abrupt increase in tariffs and attendant uncertainty will "significantly slow global growth". However, it says despite the slowdown, the global growth currently remains well "above recession" levels.

The IMF has said the world must ask why the global system warrants remapping—and recognise that decades of deepening trade ties fostered rapid but uneven economic growth. It says the deeper force behind this decline is "technological progress and automation, not globalisation".