The World Bank has revised India’s GDP growth projection for
FY27 upward to 6.6 percent in its latest South Asia Economic
Update, from an earlier estimate of 6.3 percent, reaffirming the
country’s position as the fastest-growing major economy glob
ally.
The report noted that India’s economic growth is estimated to
have strengthened from 7.1 percent in FY25 to 7.6 percent in
FY26, driven by strong domestic demand and resilient exports.
Private consumption remained a key growth driver, supported by
low inflation and rationalisation of the Goods and Services Tax
(GST).However, growth is expected to moderate slightly to 6.6
percent in FY27 due to emerging global headwinds, particularly
the ongoing tensions in West Asia.
The World Bank highlighted that elevated energy prices could
increase inflationary pressures and reduce household
disposable incomes. Government consumption is projected to
soften as higher subsidy outlays for cooking fuel and fertilisers
weigh on fiscal spending. Investment growth is also likely to
moderate amid rising input costs and global uncertainty.
While improved market access to regions such as the United
States and the European Union may support exports, slower
economic growth in major trading partners could offset these
gains.
On inflation, the report noted that price pressures across South
Asia had remained relatively subdued in early 2026. However,
risks are rising due to higher energy costs and potential
currency depreciation, which could push inflation above central
bank targets if sustained.
In India, inflation is expected to edge higher in FY26 and FY27,
driven by strong domestic demand, stabilising food prices, and
rising global energy costs.
The World Bank also observed that while South Asian countries
are increasingly adopting industrial policy measures, the
outcomes have been mixed. Import restrictions have curtailed
inbound shipments, but export-oriented strategies have yet to
deliver significant gains.