IMF projects 7% growth for India in FY27, FY28:Warns of fragile global economy and rising inflation

The International Monetary Fund (IMF) has projected India’s economy to grow by 7% in both FY27 and FY28, keeping the country among the world’s fastest-growing major economies. However, it has warned that the global economy’s ability to withstand repeated shocks is becoming increasingly fragile as higher energy and food prices, geopolitical tensions, and economic uncertainty threaten growth. In its October 2026 World Economic Outlook, the IMF forecast global economic growth of 3.1% in 2026, rising to 3.4% in 2027. Global inflation, meanwhile, is expected to climb to 4.7% in 2026, largely driven by rising energy and food prices, before easing to 4.1% in 2027. “The global economy remains resilient, but that resilience is becoming more fragile and more uneven,” the IMF said in the report. India’s growth outlook remains strong India’s growth prospects continue to stand out against an uncertain international backdrop. The IMF attributed its forecast of 7% growth in both FY27 and FY28 to stronger-than-expected economic momentum, resilient domestic demand and robust activity in the services sector. However, the Fund cautioned that growth across the global economy would remain uneven. The effects of the energy shock are expected to vary between countries, depending on their exposure to the conflict in the Middle East, movements in commodity prices and the strength of investment linked to technology. Energy supplies and AI investment offer support The global economy has managed to absorb successive shocks partly because of flexible energy supplies, increased production in other countries, the use of existing inventories and a shift towards alternative energy sources, the IMF said. Investment associated with artificial intelligence (AI) has also helped sustain economic activity and international trade, providing an additional source of support amid geopolitical and economic disruptions. However, the Fund warned that these factors may not be enough to protect the global economy if disruptions continue. Declining energy inventories, fresh geopolitical shocks and prolonged uncertainty could undermine business and consumer confidence, weighing on economic activity. The IMF said the risks to its outlook were tilted towards weaker growth. “Risks are skewed to the downside,” the report said, warning that a prolonged stalemate or further escalation in the Middle East could keep energy and food prices elevated, reignite inflationary pressures and weaken economic growth. Global trade faces pressure from tariffs and supply-chain shifts The IMF expects growth in global trade volumes to slow in 2026 before stabilising in 2027. The outlook reflects the effects of tariffs, adjustments in production chains and continued strength in technology-related trade. The report also warned that global economic imbalances are likely to narrow only modestly over the medium term. Large fiscal deficits, limited domestic rebalancing, technology-driven capital flows and differences in the composition of demand across major economies are expected to sustain external imbalances under current policies. “Global imbalances are expected to decline only modestly over the medium term, as large fiscal deficits, limited domestic rebalancing, technology-driven capital flows, and differing demand compositions across major economies under current policies continue to sustain external gaps,” the report added. AI investment and financial market risks Another concern is the possibility of investors sharply reassessing the returns expected from AI-related investments. The IMF warned that such a reassessment could lead to lower investment, corrections in equity markets and tighter financial conditions. A downturn in technology-related investment could weaken one of the factors currently supporting global economic activity, adding to the risks posed by geopolitical tensions and elevated commodity prices. IMF calls for stronger economic safeguards With the global outlook exposed to several potential shocks, the IMF highlighted the need for countries to rebuild policy buffers and strengthen their ability to withstand future disruptions. Governments face growing constraints, however, as higher borrowing costs and elevated public debt reduce their room to respond to an economic downturn. The report’s central warning is that resilience alone may not be enough to sustain growth if geopolitical disruptions persist, inflationary pressures intensify or financial markets reassess the returns from major technology investments.