India’s GDP Growth: The Indian economy is growing at a fast pace and the International Monetary Fund (IMF) has estimated the GDP growth rate to be 6.6 percent for the financial year 2025-26. In its report, IMF has said that GST reforms are expected to help India counter the impact of 50 percent higher tariff imposed by the US.

The IMF issued the statement after its Board of Executive Directors completed its annual assessment of India. It was said that India’s economy is continuously performing better. After a growth rate of 6.5 percent in FY 2024-25, real GDP grew at 7.8 percent in the first quarter of FY 2025-26.

Ability to maintain economic growth

IMF says that India’s ambition to become a developed economy in the future can be strengthened by comprehensive structural reforms. This will pave the way for long-term high growth rates. IMF also said that despite external challenges, domestic conditions remain favorable, due to which economic growth is expected to remain strong.

According to the IMF, even if the US’s 50 percent tariff continues for a long time, real GDP growth could still be 6.6 percent in fiscal year 2025-26. However, it is expected to decline to 6.2 percent in the financial year 2026-27.

Positive impact of GST reforms

The IMF believes that the GST reforms and the resulting reduction in tariff rates will help mitigate the negative impact of US tariffs. The US has imposed a 50 percent tariff on India, which also includes a 25 percent duty on energy imports from Russia.

Future risks and opportunities

The IMF warned that there are many risks to the economic outlook in the near future.

positive side:

• Implementation of new trade agreements can boost exports, private investment and employment.
• Rapid implementation of structural reforms will provide additional support to the growth rate.

negative side:

• Financial conditions may become tighter as global economic disruption increases.
• Prices of raw materials may increase.
• There may be a negative impact on trade, foreign direct investment (FDI) and economic growth.

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