Kolkata: On Wednesday, the World Bank has raised India’s GDP growth rate projection for FY27 to 6.6%. This constitutes an upward revision that comes amid the West Asia crisis. In January, in its Global Economic Prospects report, the World Bank projected that India’s GDP will grow by 6.5% in FY27. The rate of GDP growth in India has been pegged at 6% by Moody’s and 6.1% by OECD (Organisation for Economic Co-operation and Development). The common factor for each of these organisations was the impact of the US-Iran war on the economic growth of the country, mainly through higher energy prices and shrinkage of export markets.
Private consumption robust
According to the South Asia Economic Update report, the World Bank thinks India’s private consumption is robust. It is in line with what the RBI said on Wednesday morning. The World Bank also said that rate of GDP growth of India moved up from 7.1% in FY25 to 7.6% in FY25 substantially due to robust domestic demand.
The growth in consumption was supported by low inflation and a GST rejig. “Growth is projected to decelerate to 6.6 per cent in FY27, reflecting headwinds from the Middle East conflict,” the World Bank mentioned in its report. But the higher energy prices are going to spoil the gains of GST during the course of the current financial year, the World Bank cautioned.
RBI projections
While RBI has forecast the GDP growth rate for FY27 at 6.9%, it has said the growth rate for FY26 will probably be 7.6%. On Wednesday morning, RBI governor Sanjay Malhotra outlined in detail the impact that the West Asia crisis can have on the Indian economy this year and pegged the growth rate forecasts for the four quarters as the following:
Q1: 6.8%
Q2: 6.7%
Q3: 7%
Q4: 7.2%
The downward pressure is mainly due to the supply shocks, said Malhotra. He also cauitoned that supply shocks can translate into demand shocks.
GST impact can be nullified
Although the reduction in GST rates should continue to support consumer demand in the first half of FY’27, elevated global energy prices are expected to put upward pressure on prices and constrain households’ disposable income, it added.
The consumption growth by the government is set to be lower after the Centre decided to absorb the impact of the higher crude prices by lowering excise on petrol and diesel by Rs 10/litre. Higher uncertainty and increasing input costs could also lower investment growth.