IMF raises India growth forecast to 7% as global AI investment boom powers trade

Heavy global spending on artificial intelligence infrastructure is propping up world economic growth and cushioning the blow of high energy prices, the International Monetary Fund said on Tuesday, identifying India and China as prime beneficiaries of expanding technology trade.

Releasing its updated World Economic Outlook at the IMF and World Bank annual meetings in Bangkok, the fund lifted its projection for 2026 global real GDP growth to 3.1%, up from the 3.0% forecast in July. The upgrade comes despite a protracted Middle East conflict keeping crude oil prices elevated.

India retained its position as the fastest-expanding major economy worldwide. The IMF upgraded India's growth projection to 7.0% for both 2026 and 2027, an increase of 0.6 percentage points and 0.3 percentage points respectively from July estimates, citing robust domestic demand, strong services output, and deep participation in the expanding AI ecosystem.

How major economies compare on IMF growth projections

Addressing delegates in Bangkok, IMF Managing Director Kristalina Georgieva said the rapid roll-out of data centres and AI computing models has unleashed twin demand and investment shocks. The fund projects the technology boom will add between 0.2 and 0.8 percentage points of growth across emerging Asian economies, and up to 1.0 percentage point in advanced Asian markets.

IMF chief economist Silvana Tenreyro noted that AI trade had outpaced overall global commerce, directly insulating trade-heavy hubs from broader market headwinds. Without quick mitigating steps taken by governments and businesses against surging fuel costs, worldwide expansion would have slumped to 2.5%, according to the fund's research department.

Labour risks and fiscal headwinds

Alongside the economic boost, the fund sounded clear cautions over long-term stability. The IMF estimates that AI could disrupt around 40% of jobs worldwide, affecting 60% of employment in advanced economies and 23% in lower-income countries.

Speaking at a panel in Bangkok, Singapore President Tharman Shanmugaratnam warned that entry-level roles for university graduates are already facing reduced hiring demand as routine tasks are automated. World Bank President Ajay Banga urged developing nations to concentrate on practical, smaller-scale AI applications that deliver immediate gains in agriculture, health, and primary schooling without requiring massive capital investments.

Tenreyro also urged finance ministries to begin tightening fiscal budgets to lower elevated public debt, warning that central banks may need to keep monetary policies restrictive to bring projected global headline inflation of 4.7% back toward official targets.