The fund raised its growth forecast for India to 7%, one of the biggest upgrades among major economies. The irony is that it comes in a year when Indian shares have fallen and the rupee has hit record lows.
India’s economy is doing better than the International Monetary Fund expected. A lot better.
In its October World Economic Outlook, the IMF raised its forecast for India’s growth in the year to March 2027 to 7%, up from 6.4% in July. That is an upgrade of 0.6 percentage points in three months, and 0.5 points higher than its April estimate. The fund also raised its forecast for the following year to 7%.
The reasons are familiar but worth noting. The IMF cited stronger-than-expected domestic demand, robust services activity, favourable demographics, a growing home market and continuing structural reforms. India’s economy grew 7.8% in the last financial year, giving the fund a strong starting point.
Sluggish global economy
The upgrade is striking because the global picture has darkened. Conflict in West Asia has pushed oil prices sharply higher. Many emerging economies face a weaker medium-term outlook as energy costs rise and investors grow cautious.
India is a large oil importer, so it might have been expected to suffer more than most. Instead, the IMF sees it as an exception. Speaking in Bangkok, Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said India entered the energy shock with strong growth and fiscal discipline already in place.
India is not alone in raising forecasts. The Reserve Bank of India and the World Bank both expect 7.1% growth this year, and Fitch’s research arm BMI has raised its estimate to 7.5%.
Strong economy, weak markets
Here is what makes the upgrade interesting. By most market measures, 2026 has been a difficult year for India.
The Nifty 50 has fallen more than 10% this year. Foreign investors have pulled more than ₹3 lakh crore out of Indian shares. The rupee hit a record low near 97 to the dollar. Inflation has climbed to a 23-month high, and the RBI raised interest rates in October for the first time since 2023.
So why does the IMF see strength where investors see trouble?
Part of the answer is timing. Markets look ahead and react to risks; GDP measures what is happening now. Part of it is composition. India’s growth is driven by domestic consumption and services, which are less exposed to oil prices than manufacturing or exports. And part of it is valuation: Indian shares started the year expensive compared with other emerging markets, so even a strong economy could not prevent a fall when global money moved elsewhere, particularly toward AI-linked stocks in North Asia.
The risks
The fund was not entirely upbeat. It warned that India remains exposed to high oil prices and persistent global uncertainty, both of which could weigh on demand. If crude stays above $100 a barrel for long, the costs will eventually flow into inflation, company margins and consumer spending.
There are also domestic warning signs. Retail inflation reached 5.54% in September, and wholesale inflation 11.39%. Ratings agency Ind-Ra expects wholesale inflation to exceed 12% and retail inflation to cross 6% in October. If that happens, the RBI is likely to raise rates again, which would slow borrowing and investment.
What next?
For policymakers, the IMF’s upgrade is welcome validation. Finance Minister Nirmala Sitharaman is at the IMF and World Bank annual meetings in Bangkok this week, where India’s growth story will be a strong talking point.
For investors, it offers a reminder that economic growth and stock returns do not always move together. A strong economy can support earnings over time, but in the short term, markets are being driven by oil, inflation and global money flows. The IMF’s forecast suggests the foundations are solid. Whether markets agree will depend on how quickly those external pressures ease.
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