India to grow 7.2% in FY26: World Bank

The World Bank on Tuesday raised India’s growth forecast for FY26 to 7.2%, up from 6.3% projected in June 2025, citing strong domestic demand, including strong private consumption. The improvement is supported by tax reforms and rising real household incomes in rural areas, it said. Growth is estimated to moderate to 6.5% in FY27, assuming that the 50% tariffs by the United States remain in place throughout the forecast horizon, according to the World Bank’s latest Global Economic Prospects (GEP) report. In FY28, growth is set to edge up to 6.6%, supported by resilient services activity, a recovery in exports, and a pickup in investment. Despite higher tariffs on certain exports to the US, the growth outlook for FY27 remains unchanged from the June projection, as the negative impact of higher tariffs will be offset by stronger-than-anticipated domestic demand. Gross domestic product (GDP) growth projections for FY26 are slightly lower than 7.4% estimated by the National Statistical Office (NSO) on January 7. For South Asia, growth is expected to rise to 7.1% in 2025, driven by strong economic activity in India that offset the impact of rising trade tensions and heightened policy uncertainty. It is projected to slow to 6.2% in 2026, reflecting the impact of higher US tariffs on India’s exports, the report noted. Global growth is expected to moderate marginally to 2.6% in 2026 from 2.7% in 2025. The US economy is estimated to rise to 2.2% from 2.1%, while China's economic growth will slow to 4.4% from 4.9%. “With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president for development economics. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets. Over the coming years, the world economy is set to grow slower than it did in the troubled 1990s—while carrying record levels of public and private debt,” he added. The report flagged downside risks to the regional (South Asia) outlook, including increase in trade restrictions, global trade policy uncertainty, tighter financial conditions amid financial vulnerabilities, increased social unrest, and more frequent or severe climate-related disasters.At the same time, it highlighted potential upside risks such as progress in bilateral trade negotiations, faster technology-led investment growth, and gains from greater political stability after elections in several economies. “To avert stagnation and joblessness, governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education,” said Gill.