India is set to retain its position as the world’s fastest-growing major economy over the next two years, even as global growth moderates and several large economies struggle to regain momentum, according
to the latest World Economic Outlook Update released by the International Monetary Fund in January 2026.
The IMF estimates India’s economy to grow by 7.3 per cent in 2025, followed by a steady 6.4 per cent in both 2026 and 2027, significantly outperforming global and advanced economy averages. In contrast, the global economy is projected to expand at 3.3 per cent in 2025 and 2026, before easing slightly to 3.2 per cent in 2027, underscoring the widening growth gap between India and the rest of the world.
The divergence is even more striking when compared with advanced economies, which are collectively expected to grow at a sluggish pace of around 1.7-1.8 per cent over the forecast period. The United States is projected to grow at 2.4 per cent in 2026, while the Euro Area is expected to expand by just 1.3 per cent. Japan’s growth is seen weakening further, reflecting persistent structural challenges.
China, long seen as the primary engine of global growth, is also slowing. The IMF projects China’s economy to grow at 4.5 per cent in 2026 and ease further to 4.0 per cent in 2027, well below India’s projected pace. This marks a clear shift in Asia’s growth dynamics, with India increasingly emerging as the region’s most consistent large-scale growth driver.
Beyond headline growth numbers, what sets India apart is the relative stability of its economic trajectory at a time when many emerging markets are experiencing sharp swings. Brazil’s growth is projected to fluctuate from 2.5 per cent in 2025 to 1.6 per cent in 2026 before recovering to 2.3 per cent in 2027. Mexico is expected to move from 0.6 per cent to 1.5 per cent and then to 2.1 per cent over the same period, while Russia’s growth remains muted below 1 per cent before inching up to 1.0 per cent in 2027. India, by comparison, is projected to moderate from 7.3 per cent to 6.4 per cent and then hold steady, offering rare predictability among major emerging economies.
The IMF said India’s robust outlook is underpinned by resilient domestic demand, sustained public investment, and a gradual recovery in private capital expenditure. Among emerging and developing Asian economies, India continues to lead, outpacing regional peers and contributing significantly to Asia’s projected 5.0 per cent growth in 2026. As a group, emerging market and developing economies are expected to grow at 4.2 per cent in 2026, well below India’s projected pace.
“In India, growth is revised upward by 0.7 percentage point to 7.3 percent for 2025, reflecting the better-than expected outturn in the third quarter of the year and strong momentum in the fourth quarter. Growth is projected to moderate to 6.4 percent in 2026 and 2027 as cyclical and temporary factors wane,” the IMF said.
On inflation, the Fund noted that price pressures in India are expected to return close to target levels of 2–6 per cent after a marked decline in 2025, helped by subdued food prices. This, coupled with stable growth, strengthens India’s macroeconomic position at a time when several economies continue to grapple with sticky inflation and policy uncertainty.
Globally, the IMF said headwinds from shifting trade policies are being offset by tailwinds from surging investment related to technology, including artificial intelligence, particularly in North America and Asia, along with supportive fiscal and monetary conditions and the adaptability of the private sector. Even against this backdrop, India stands out as one of the few large economies combining scale, speed, and stability in its growth outlook.
