India to remain fastest-growing economy with 6.5% GDP in FY26, but reforms key for future momentum: IMF

India is set to retain its position as the world’s fastest-growing major economy, with a projected GDP growth rate of 6.5% in 2025-26, according to the International Monetary Fund (IMF). The forecast, driven by strong private investment and macroeconomic stability, underscores India’s economic resilience despite global uncertainties.

The IMF’s assessment follows the Indian government’s second advance estimate, which also pegged GDP growth at 6.5% for 2024-25. "Real GDP is expected to grow at 6.5% in 2024-25 and 2025-26, supported by robust growth in private consumption on the back of sustained macroeconomic and financial stability," the IMF said in its statement.

While India's growth momentum remains strong, the IMF emphasized the need for comprehensive structural reforms to sustain long-term expansion. "Efforts should focus on implementing labour market reforms, strengthening human capital, and supporting greater participation of women in the labour force," the report stated.

Boosting private investment and foreign direct investment (FDI) will be critical, the IMF noted, calling for stable policy frameworks, improved ease of doing business, and deeper trade integration through tariff and non-tariff reductions.

Despite some moderation in growth, India’s economy has remained resilient, with a 6% year-on-year GDP growth recorded in the first half of 2024-25. Inflation has eased within the Reserve Bank of India’s tolerance band (2-6%), though food price fluctuations have caused volatility.

The financial sector, the IMF highlighted, remains strong, with non-performing loans at multi-year lows. Fiscal consolidation efforts have continued, and the current account deficit has remained well contained, aided by robust service exports.

The IMF’s latest assessment underscores India’s economic strength while urging continued reforms to secure long-term prosperity and achieve its ambition of becoming an advanced economy by 2047.

India’s real GDP growth accelerated to 6.2% in October-December 2024 (Q3 FY25), up from 5.6% in the previous quarter (Q2), driven by rising consumption demand, according to quarterly GDP estimates from the National Statistics Office (NSO) released on February 27. In comparison, GDP had grown 9.5% in Q3 of 2023-24.

For the full financial year FY25, the second advance estimates peg GDP growth at 6.5%, slightly higher than the 6.4% projected in January’s first advance estimates.