New Delhi, Jan. 20 -- The International Monetary Fund (IMF) on Monday sharply raised its economic growth forecast for India for the current financial year (FY26) to 7.3% from 6.6% in October, reflecting the better-than-expected outcome since then. The IMF projected in its World Economic Outlook 2026 that India's growth would then moderate to 6.4% in FY27 and FY28 as cyclical and temporary factors waned. Inflation in India is expected to return to near target levels after a marked decline in 2025 driven by subdued food prices, the IMF said. The multilateral agency also upgraded its estimate of global economic growth for calendar years 2025 and 2026 to 3.3%, from 3.2% and 3.1% respectively in October. For 2027, it forecast 3.2% growth. However, it warned that over-optimism about artificial intelligence (AI), alongside rising trade and geopolitical tensions, could trigger a sharp market crash and disrupt the global economy. The IMF attributed the steady global growth thus far to a balance of two opposing forces: headwinds from volatile trade policies and tailwinds from a surge in AI and technology investments across North America and Asia. This was further bolstered by supportive fiscal and monetary measures, alongside the adaptability of the private sector in navigating these shifts, it said. Global headline inflation is expected to decline from an estimated 4.1% in 2025 to 3.8% in 2026 and 3.4% in 2027, suggesting lower energy costs and softer demand. The IMF's inflation projections are broadly unchanged from those forecast in October. Experts said the Indian economy has handled external headwinds deftly. "The main message is that all the global supply-chain-related uncertainty and tariff-related issues have not had any significant impact on India's growth prospects. Estimates by the National Statistics Office at 7.4%, and 7.2% and 7.3% by the World Bank and the IMF indicate that FY26 is going to turn out to be quite good," said EY India chief policy advisor D.K. Srivastava. There may be some moderation in FY27, in part due to the base effect, he added. "India's growth story is intact in spite of global uncertainties. There are no major downside risks to growth as long as we are able to negotiate these global uncertainties and minimise their adverse impact on us," Srivastava said. Last week the World Bank projected that the Indian economy would expand 7.2% in FY26 as robust domestic demand reflected strong private consumption, supported by tax reforms and improvements in real household earnings in rural areas. It has projected 6.5% growth for India in FY27. Experts said India's strong growth projections for FY26 were the outcome of a carefully sequenced set of fiscal, monetary, and trade reforms that cushioned the economy and laid the foundation for future growth amid slowing global demand and rising trade friction....