IMF Projects Robust 6.6% Growth For India In 2025-26, Citing GST Cushion Against US Tariffs
The International Monetary Fund (IMF) forecasts India’s economy to grow at a robust 6.6% in FY2025-26, maintaining its status as one of the world’s fastest-growing major economies. This projection comes despite the significant headwind of prolonged 50% US tariffs on Indian goods, with the IMF crediting domestic policy measures, particularly GST reforms, for providing a crucial cushion.
Key Takeaways
- India’s GDP is projected to grow at 6.6% in FY2025-26.
- Growth remains strong despite 50% US tariffs on Indian goods.
- GST reforms are identified as a key factor offsetting tariff impacts.
- Growth is expected to moderate to 6.2% in FY2026-27.
Strong Growth Momentum
The IMF’s annual Article IV consultation reveals India’s continued economic strength, following growth of 6.5% in FY2024-25 and a surge to 7.8% in the first quarter of FY2025-26. This positions India among the fastest-growing major economies globally.
GST Reforms Counter US Tariff Impact
The report specifically highlights how recent Goods and Services Tax (GST) reforms, including rate reductions and simplification, are helping offset the drag on exports caused by high US tariffs. These tax adjustments are projected to boost domestic consumption and contain headline inflation.
Future Outlook and Risks
However, the IMF projects a moderation in growth to 6.2% in FY2026-27, attributing this slowdown to the full effects of persisting high US tariffs dampening external demand. The global body also warned of significant near-term risks, including potential geoeconomic fragmentation leading to tighter financial conditions and reduced trade.
Overall, the IMF commended India’s strong economic performance and resilience while urging continued structural reforms to sustain momentum toward the nation’s goal of becoming an advanced economy.
