Washington: The International Monetary Fund (IMF) on Monday raised India’s economic growth projection for 2025 by a significant 0.7 percentage points to 7.3 per cent, citing stronger-than-expected performance in the second half of the year, even as it expects growth to moderate in the years ahead.

In its latest World Economic Outlook update, the IMF said the upward revision reflects a “better-than-expected outturn in the third quarter and strong momentum in the fourth quarter”, reinforcing India’s position as one of the fastest-growing major economies globally.

The Fund projected that India’s GDP growth would ease to 6.4 per cent in both 2026 and 2027 as cyclical and temporary factors begin to fade.

Despite the expected moderation, India is set to remain a key driver of growth among emerging market and developing economies, which the IMF expects to expand at just over 4 per cent during 2026 and 2027.

The update noted that emerging and developing Asia continues to benefit from robust technology-driven investment and trade, even as global growth momentum remains uneven.

Globally, the IMF said growth is projected to hold steady at 3.3 per cent in 2026, supported by easing trade tensions, accommodative financial conditions and a surge in investment linked to technology, particularly artificial intelligence.

Inflation trends were also favourable for India. The IMF said inflation is expected to return close to target levels after a sharp decline in 2025, driven largely by subdued food prices, which could provide further support to domestic demand.

However, the Fund cautioned that risks to the outlook remain tilted to the downside. A reassessment of expectations around AI-driven productivity gains could trigger a pullback in investment and tighter global financial conditions, with spillover effects on emerging economies.

On the upside, faster adoption of artificial intelligence could boost global growth, provided productivity gains materialise, and financial risks remain contained.

IANS