Contents
India’s economy is on a roll, with the IMF giving a thumbs-up to its strong growth, stable inflation, and sound policy foundations. This article breaks down the latest IMF report and explains why India is expected to remain a top performer in 2025-26.
IMF Praises India’s Economic Resilience
The International Monetary Fund (IMF) has once again lauded India’s economic performance, calling it a standout among emerging markets. The IMF’s latest assessment highlights robust growth, strong policy foundations, and well-managed inflation. India’s economy has shown resilience, even in the face of global challenges like higher UK tariffs and external shocks.
Key Drivers of Growth
India’s growth has been powered by a mix of strong domestic demand, robust private consumption, and increased public investment. In FY2024-25, India’s real GDP expanded by 6.5%, and in the second quarter of FY2025-26, it surged to 7.8%. The IMF attributes this performance to reforms such as the Goods and Services Tax (GST), inflation targeting, and the expansion of digital public infrastructure.
Inflation and Job Market
Headline inflation dropped to 1.5% in September 2025, thanks to lower food prices, while core inflation rose to 4.6%. The labour market has also improved, with formal employment and real wages rising in both rural and urban areas. Unemployment remains low at 5.2%, indicating a healthy job market.
Fiscal and Financial Stability
India’s fiscal policy remains broadly balanced, with the central government focusing on consolidation and states increasing social spending. The recent GST reforms, featuring simplified slabs and lower compliance burdens, are seen as a welcome step to boost consumption and broaden the tax net. Financial conditions have improved, with equity markets recovering, bond yields easing, and credit conditions stabilizing.
External Indicators
India’s external indicators are stable, with a current account deficit of just 0.6% of GDP in FY2024-25, supported by strong services exports. Foreign exchange reserves have risen to $695 billion, providing a strong buffer against external shocks.
IMF Growth Projections
Looking ahead, the IMF projects real GDP growth of 6.6% in FY2025-26 and 6.2% in FY2026-27. The report states that despite external headwinds, India’s growth is expected to remain robust, supported by favourable domestic conditions.
Conclusion
India’s strong economic fundamentals, coupled with sound policy management, make it a bright spot in the global economy. The IMF’s positive outlook is a testament to the country’s resilience and potential for sustained growth in the coming years.