India’s economy will surpass IMF’s projections for FY26, says finance secretary #IndiaFinance

New Delhi: India’s economy will potentially grow at between 6.3% and 6.8% in 2025-26, likely settling near the midpoint of that range and surpassing the International Monetary Fund’s (IMF) forecast of 6.2%, finance secretary Ajay Seth said on Friday.

Seth, however, said India’s public debt remained elevated and must be reduced through sustained fiscal consolidation. He was speaking at the annual growth conference hosted by Ashoka University’s Isaac Centre for Public Policy on Friday.

Seth’s projection is in line with the Economic Survey’s forecast earlier this year that India’s economy would grow at between 6.3% and 6.8% in FY26. However, several multilateral agencies have cut their growth projections for the Indian economy.

The International Monetary Fund last month cut its FY26 economic growth forecast for India to 6.2% from its earlier estimate of 6.5% due to potential trade risks as a result of the US’ global tariff war.

The US last month announced a 27% reciprocal tariff on Indian goods, citing India’s average 52% duty on US imports, as part of a broader strategy to address trade imbalances and protect domestic industries. However, the US has temporarily reduced the tariff to 10%, providing relief to India and other trading partners.

“One must remain committed to fiscal consolidation for two key reasons,” Seth said, adding that elevated public debt was a major factor why credit rating agencies viewed India cautiously. “(They believe) our capacity to withstand another crisis on the scale of Covid-19 is limited at this point,” he said.

Seth said India’s interest payments as a proportion of tax revenue were relatively high as compared with that of countries like Indonesia, which holds a better credit rating.

The Union government has criticized global credit rating agencies for undervaluing India’s sovereign rating despite the country’s strong growth, reforms, and macroeconomic stability.

Despite India’s consistent GDP growth, large foreign exchange reserves, a stable financial system, and political stability, India continues to receive a sovereign credit rating just above the investment grade, the Centre has argued.

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‘Recalibrate global policies’

On the recently concluded IMF-World Bank Spring Meetings in Washington, Seth said there was growing consensus for a rebalancing within both the IMF and G-20 meetings, although there were divergent views on the mechanisms and leadership required for this shift.

He added that uncertainty in the global economy due to the US tariffs was exacerbating existing challenges and, coupled with ongoing geopolitical tensions and economic disruptions, casting a shadow over global growth prospects.

Seth emphasised that global economic policies should be recalibrated to achieve a balance that would address both short-term needs and long-term goals, fostering stability in a rapidly changing world. “We have enough resilience to fight. We have to find our way. I am hopeful,” he said.

Arvind Panagariya, chairman of the 16th Finance Commission, said India’s per capita income must grow at 7.3% annually to reach $14,000 by 2047, a goal he believes is achievable.

“From 2003–04 to 2019–20, India clocked an impressive 9% average growth in real dollar terms. Even after factoring in Covid, India grew at 7.8% annually over 21 years,” he said at the event hosted by Ashoka University.

“India weathered three big shocks—the global financial crisis, Covid, and a banking collapse—and still grew steadily. Despite massive NPAs (non-performing assets, or bad loans) and an NBFC (non-banking financial companies) crisis, the Indian economy held its ground with strong momentum,” Panagariya added.

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