Growth trimmed: India remains the world’s fastest-growing major economy, but two multilateral organizations – the International Monetary Fund (IMF) and the Asian Development Bank (ADB) – have turned more cautious on the near-term outlook, citing rising energy costs and global uncertainty after the Iran war.
What changed: India may grow at 6.4% in 2026, as against earlier projection of 6.5% seen in April, as per the IMF’s latest World Economic Outlook Update. The country’s economy, however, is seen growing at a rate of 6.7% in 2027. The Fund said strong private consumption and service activities should continue to underpin growth despite a challenging external environment.
The ADB, however, is more bearish in its outlook and has trimmed the FY 2027 growth forecast to 6.6% from 6.9% in its recent Asian Development Outlook report. It attributed the slowdown to higher crude oil prices and transportation costs following the Middle East conflict, warning that elevated energy prices could erode real incomes and weaken consumer sentiment. The ADB also raised its FY 2027 inflation forecast to 5.2%.
The bigger picture: The downgrades are modest, but they reflect the growing impact of external risks on India’s economy. As a major energy importer, India is vulnerable to oil price shocks and geopolitical disruptions in the Gulf, even as resilient domestic demand continues to underpin long-term growth prospects.
^^We have more on IMF’s growth forecast for the MENA region in this afternoon’s Planet Finance.
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