‘Growth remains robust’: IMF backs India’s prospects; praises strong fundamentals and controlled inflation – The Times of India

The economic outlook for India remains decidedly positive, with the International Monetary Fund (IMF) pointing to strong policy fundamentals, resilient growth and well-controlled inflation in its latest assessment. The Washington-based agency said India’s performance has been underpinned by prudent macroeconomic management and a decade of structural reforms that continue to bear fruit.In a report, the IMF noted that “real GDP growth has remained robust following a strong post-pandemic recovery,” adding that reforms such as the goods and services tax (GST), inflation targeting and the expansion of digital public infrastructure “have laid a strong foundation for sustainable growth.” It highlighted that these gains have contributed to rising living standards and a sharp decline in extreme poverty, which now stands at 5.3 percent.

According to the IMF, the Indian economy has shown resilience despite higher US rates, with the overall macroeconomic impact expected to be manageable. Another excerpt highlighted that India’s export exposure is limited compared to peers: “India is less exposed to global trade than many other Asian emerging markets, and its large and growing domestic market offers the potential for economic resilience to external shocks.”Growth remained strong in FY 2024-25, with real GDP growing 6.5 percent, supported by vibrant private consumption and government investment. In the second quarter of FY 2025-26, real GDP grew by 7.8 percent, aided by robust rural demand and stable inflation dynamics. Headline inflation fell to 1.5 percent in September 2025 due to lower food prices, while core inflation rose to 4.6 percent.Labor market data showed steady improvement, with formal employment and real wages rising in both rural and urban areas. Unemployment remained low at 5.2 percent.The IMF said fiscal policy remained broadly balanced, with the Center continuing consolidation and states increasing social spending. The recent GST reform – with simplified tax rates and lower compliance burdens – was described as a ‘welcome reform’ that was expected to support consumption and widen the tax net.Financial conditions have also improved, partly thanks to the actions of the Reserve Bank of India. The Fund found that equity markets have recovered, bond yields have fallen and credit conditions have stabilised, although bank credit growth has been moderate.India’s external indicators remain stable. The current account deficit stood at 0.6 percent of GDP in FY 2024-25, supported by strong services exports. Foreign exchange reserves rose to $695 billion in October.Looking ahead, the IMF expects real GDP growth of 6.6 percent in FY 2025-26 and 6.2 percent in FY 2026-27. An excerpt from the outlook reads: “Despite external headwinds, growth is expected to remain robust, supported by favorable domestic conditions.”The agency has established a detailed set of policy priorities to maintain momentum. It said that “maintaining sensible macroeconomic policies is crucial to create conditions for sustainable growth,” and called for agile responses to external uncertainty, especially around tariffs. Budget support to address tariff-related disruptions should be “targeted, transparent and time-bound”, while the pace of consolidation should be tailored to the impact on the output gap.It added that medium-term fiscal consolidation is needed to rebuild buffers, supported by stronger domestic revenue mobilization. It said monetary policy should remain data-driven, with “room for further easing” if rates remain in place for an extended period. The exchange rate, the report noted, must be able to act as a shock absorber. Financial policy must continue to ensure stability by addressing sector-specific vulnerabilities.