New Delhi, Oct 24 (IANS) India’s economy is projected to expand at a healthy pace of 6.6 per cent this year (FY26), up from 6.5 per cent in 2024 (FY25) -- owing to strong Q2 growth and GST 2.0 reforms, the International Monetary Fund (IMF) on Friday said in its latest regional economic outlook report for Asia.

The forecast for India has improved since April 2025 as strong Q2 growth and the goods and services tax (GST) reform are expected to outweigh the negative effects of higher US tariffs on demand for Indian goods.

India’s growth is expected to moderate to 6.2 per cent in 2026, according to the IMF report.

“Economies in the Asia-Pacific region have been resilient in 2025, posting stronger-than-expected economic growth in the first half of the year amid external and domestic challenges. Nevertheless, higher US tariffs and increasing protectionism will likely reduce demand for Asian exports and eventually weigh on growth in the near-term,” said the IMF.

China’s growth is expected to moderate to 4.8 per cent in 2025, from 5.0 per cent in 2024.

“India will still expand at a healthy pace of 6.6 per cent this year, the most among major emerging economies,” the IMF noted.

The latest IMF report further stated that higher US tariffs and increasing protectionism will likely reduce demand for Asian exports and eventually weigh on growth in the near-term.

“Amid these forces, policies should focus on increasing regional integration by reducing barriers to trade and investment, and boosting productivity growth with better financial intermediation and allocation of capital. Additional measures to support the services sector, mitigate the impact of population aging, and upgrade policy frameworks are critical for resilient and sustainable growth, and would help prepare for future shocks,” the report suggested.

Growth in Asia is expected to hold broadly steady in 2025 and moderate noticeably in 2026, given building negative effects of higher US tariffs and headwinds to medium-term potential growth.

“Reflecting the higher tariffs and higher trade policy uncertainty, GDP growth forecasts for most Asian countries in 2025 and 2026 are below those of October 2024 — China and India being notable exceptions,” the IMF report noted.

The IMF projects Asia's economy to expand 4.5 per cent in 2025, slowing from 4.6 per cent last year but up 0.6 percentage point from its estimate in April, due to strong exports driven in part by front-loading of shipments ahead of higher US tariffs.

Asia is projected to continue to contribute around 60 per cent of global growth in 2025 and 2026. Inflation is expected to stay soft in 2025 in most emerging markets and move closer to targets in 2026, said the IMF.