India’s economic juggernaut shows no sign of slowing despite global headwinds.
The International Monetary Fund (IMF), in its latest Regional Economic Outlook for Asia, projects India to grow at a robust 6.6 per cent in 2025–26 (FY26), up from 6.5 per cent in the previous fiscal year, making it the world’s fastest-growing major economy.
The momentum, the IMF said, stems from strong second-quarter performance and the rollout of GST 2.0 reforms that are boosting tax compliance, formalisation, and fiscal efficiency.
The Fund’s revision marks an upgrade from its April forecast, underscoring India’s resilience at a time when higher US tariffs and intensifying protectionism are expected to dampen demand for Asian exports. “India will still expand at a healthy pace of 6.6 per cent this year — the most among major emerging economies,” the IMF observed, calling New Delhi’s growth “a standout story in an otherwise uneven regional outlook.”
In comparison, China’s GDP is forecast to moderate to 4.8 per cent in 2025 from 5.0 per cent in 2024, as structural property-sector issues and weak domestic demand continue to weigh on the recovery. The broader Asia-Pacific region is expected to expand by 4.5 per cent in 2025, slightly lower than 4.6 per cent last year, but still contributing nearly 60 per cent of global output growth over 2025–26.
The IMF report warned, however, that Asia’s momentum could soften as the impact of tariff hikes by the United States — India’s top export destination — ripples through regional trade networks. Higher trade policy uncertainty, it noted, is already prompting some exporters to front-load shipments ahead of tariff deadlines.
Yet, India’s diversified growth base, driven by services exports, infrastructure investment, digital transformation, and domestic consumption, is expected to cushion the blow.
“Economies in the Asia-Pacific region have been resilient in 2025, posting stronger-than-expected growth in the first half of the year amid external and domestic challenges. Nevertheless, higher US tariffs and increasing protectionism will likely reduce demand for Asian exports and eventually weigh on growth,” the IMF said.
For India, the report added, reforms such as GST 2.0, improved logistics, and fiscal prudence are expected to sustain medium-term expansion. The IMF advised policymakers across Asia to focus on deepening regional integration, reducing trade barriers, and improving productivity through better capital allocation and financial intermediation. It also emphasised the need to strengthen the services sector, manage demographic transitions, and modernise policy frameworks to ensure sustainable and inclusive growth.
Among other major economies, Japan is expected to grow at just 1.2 per cent, while the United States is projected at 2.1 per cent and the eurozone at 1.3 per cent — underscoring India’s exceptional growth differential. The IMF’s analysis suggests that by 2026, India will account for over 18 per cent of Asia’s GDP expansion and nearly a fifth of global incremental growth.
Inflation across emerging Asia is likely to remain subdued in 2025, stabilising near central-bank targets by 2026. The IMF concluded that Asia’s growth outlook “remains strong but faces rising challenges,” with India emerging as the region’s key pillar of stability and optimism.
Economists maintain that by maintaining steady reforms and capitalising on domestic demand, India continues to defy global trade turbulence — reaffirming its position as the engine driving the world’s fastest-growing region.
