India resilient despite oil shock: IMF

The IMF lowered India's 2026 growth forecast to 6.4% due to higher global oil prices driven by the Middle East conflict but raised its 2027 outlook, citing resilient domestic demand, stronger economic activity, easing energy pressures, and sustained medium-term growth prospects despite global uncertainty

Washington: India’s economy remains resilient despite the headwinds of higher global oil prices triggered by the Middle East conflict, the International Monetary Fund (IMF) said as it marginally lowered the country’s 2026 growth forecast to 6.4 per cent while projecting stronger expansion next year as the energy shock eases.

The IMF, in its latest World Economic Outlook update released on Wednesday (local time), revised India’s growth forecast for 2026 down by 0.1 percentage point from its April projection but raised the 2027 forecast by 0.2 percentage point, saying stronger-than-expected economic activity and resilient domestic demand continue to underpin the country’s outlook.

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Presenting its latest World Economic Outlook (WEO) Update, IMF officials said India had weathered the global uncertainty better than many economies, although higher energy prices linked to the conflict in the Middle East would weigh on growth this year.

“For India, we have the forecast for this year revised down very slightly by 0.1 percentage point to 6.4. And growth for next year, for 2027, revised upward by 0.2 percentage point,” IMF Research Department Division Chief Deniz Igan told reporters during a press briefing.

She said the revised outlook reflected two opposing forces. “On the upside, we have the better-than-expected outturn in the most recent data. But we also have high-frequency indicators through April showing quite a bit of resilience in overall economic activity,” Igan said.

However, she said the positive momentum had been more than offset this year by rising energy costs. “But these positive effects are then more than offset for 2026 by the higher energy prices we have in our baseline in the July Update, as well as the greater pass-through of those higher oil prices to prices at the pump in India,” she said.

The Fund expects those pressures to ease next year. “Moving into 2027, we are expecting (India’s growth) strengthening with the energy shock dissipating and medium-term growth being estimated at around 6.5 per cent and output closing. We expect some pickup there,” Igan said.

The updated India forecast came as the IMF kept its global growth projections broadly unchanged at 3 per cent for 2026 and 3.4 per cent for 2027, saying the world economy had so far weathered the Middle East conflict better than initially feared.

“The global outlook is being shaped by two powerful forces pulling in opposite directions: the lingering effects of the energy shock from the war in the Middle East and a technology-driven investment boom,” IMF Deputy Research Director Petya Koeva Brooks said in her opening remarks.

She said the Fund expected a “V-shaped recovery” in the global economy, with weaker growth this year followed by a rebound in 2027. However, she cautioned that risks remained “very much on the downside”, warning that a renewed escalation of the conflict could trigger higher oil prices, tighter financial conditions and greater volatility in global markets.

The IMF also raised its global headline inflation forecast to 4.7 per cent for 2026, saying the disinflation trend that had been underway since early 2024 had stalled.

At the same time, it noted that rapid investment in artificial intelligence was helping offset some of the economic damage from higher energy prices, benefiting countries integrated into global technology value chains. India imports more than 80 per cent of its crude oil requirements, making global energy prices a key factor influencing inflation, the current account and overall economic growth.

Any prolonged disruption to oil shipments through the Strait of Hormuz could increase import costs for India and put renewed pressure on domestic fuel prices.