Despite escalating tensions in West Asia, the International Monetary Fund (IMF), in its World Economic Outlook (WEO), has projected that India’s economy is likely grow at 6.5 per cent in 2027. It also noted that growth for 2026 has been moderately revised upward by 0.3 percentage points (and by 0.1 percentage point compared to the January estimate) to 6.5 per cent. This upward revision is driven by positive carryover effects from the strong economic performance in 2025 and a reduction in additional US tariffs on Indian goods - from 50 per cent to 10 per cent - which outweigh the adverse impact of the Middle East conflict.

The 6.5 per cent growth projection makes India the fastest-growing major economy in 2026. The IMF added that, under the baseline assumption that the war will be relatively short-lived, global growth is expected to slow modestly. Growth is projected at 3.1 per cent in 2026 and 3.2 per cent in 2027, marking a deceleration from the estimated 3.4 per cent recorded in 2025. At market exchange rates, global output is expected to expand by 2.6 per cent in both 2026 and 2027.

The relatively modest downward revision to global growth in the reference forecast, compared to the January 2026 WEO update, reflects the presence of continued tailwinds that partially offset the negative shocks from the conflict. These include lower tariffs, existing policy support, and carryover effects from stronger-than-expected economic performance at the end of 2025 and in the first quarter of 2026 in some cases.