Despite signs of a slowdown in global growth, India is set to retain its position as the world’s fastest growing major economy over the next two years, according to the World Economic Outlook Update released in January 2026 by the International Monetary Fund (IMF).
The IMF estimates that India’s economy will grow at 7.3 percent in 2025, followed by 6.4 percent in both 2026 and 2027, a much better performance than the average of global and developed economies.
In contrast, the world economy is projected to grow at 3.3 percent in 2025 and 2026, after which the rate will slow to 3.2 percent in 2027.
India’s strong economic outlook is supported by the strength of domestic demand, sustained public investment and a gradual recovery in private capital expenditure.
Compared to other major economies, India’s growth pace remains remarkably strong: the US is projected to grow by 2.4 per cent in 2026, China by 4.5 per cent and the euro zone by a modest 1.3 per cent.
Among emerging and developing Asian economies, India remains the leader, outperforming regional peers and significantly contributing to Asia’s projected 5.0 percent growth in 2026.
The IMF says emerging markets and developing economies as a group are expected to grow at 4.2 percent in 2026, much lower than India’s projected pace.
“In India, the growth forecast for 2025 has been raised by 0.7 percentage points to 7.3 per cent, reflecting better-than-expected performance in the third quarter of the year and strong momentum in the fourth quarter. The growth rate is projected to decline to 6.4 per cent in 2026 and 2027 due to weakening of cyclical and transitory factors,” the IMF said.
The IMF said inflation in India is expected to return close to the target level (2-6 percent) after a significant decline in inflation in 2025 due to softening food prices.
The report on the global economy said challenges posed by changes in trade policies are being offset by increased investment in technology, particularly artificial intelligence (AI), which is higher in North America and Asia than in other regions.
Furthermore, fiscal and monetary support, broadly favorable financial conditions and the adaptability of the private sector are also positively impacting the economy.