The International Monetary Fund (IMF) on Tuesday, April 14, revised and upgraded India’s growth forecast for the financial year 2026-27 to 6.5%, which means an additional 0.1 per cent growth in gross domestic product (GDP) over the previous estimate made in January.
The obvious reason for this is the reduction in US tariffs on Indian goods from 50% to 10%, which will completely mitigate the adverse impact of the ongoing West Asia conflict caused by the US-Israeli attacks in Iran in February.
However, the IMF cut its forecast for global growth to 3.1% in 2026 from 3.3% earlier in January. It warned that the Iran war has stalled the world’s economic momentum this year, and highlighted the implication that growth could be lower this year than in 2025. This expected growth figure would also indicate a slowdown from an expansion of 3.4% in 2025.
IMF raises global inflation amid West Asia conflict
The IMF has raised its expectation for global inflation this year to 4.4% in 2025 from 4.1%. It had estimated global inflation at 3.8% in January this year.
However, the US-Israeli attack on Iran and the worsening situation in West Asia after February 28, including the closure of the Strait of Hormuz, led to a rise in oil and gas prices worldwide. The situation was also worsened by Iran’s retaliatory attacks on energy facilities in the Gulf countries.
The global economy had shown surprising resilience in the face of President Donald Trump’s protectionist policies until the conflict, the Associated Press reports. America, which was once the world’s largest economy and an open market for imports, had erected a wall of import taxes.
‘The war in the Middle East has slowed down the pace’
A technological boom, including massive investments in data centers and artificial intelligence, was predicted to strengthen the world economy.
“The war in the Middle East has stalled this momentum,” IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post accompanying the latest World Economic Outlook.
However the IMF forecast assumes that the West Asia conflict is a short-term phenomenon, and that energy prices will rise by “moderate 19%” this year. The IMF also highlighted a “dire scenario” if the war drags on, saying if energy shocks extend into next year, global growth could fall by 2% in 2026 and 2027. “Despite recent news of a temporary ceasefire, some damage has already been done, and downside risks remain high,” Gourinchas said.
