GDP growthImage Credit source: AI
The World Bank has raised India’s economic growth forecast for FY26 to 7.2% from the estimated 6.3% in June 2025, citing strong domestic demand, including robust private consumption. He said this recovery is being supported by tax reforms and rising real household income in rural areas.
According to the World Bank’s latest Global Economic Prospects (GEP) report, growth is projected to slow to 6.5% in FY27, assuming the 50% tariffs imposed by the US remain in place for the entire projected period. In FY28, growth is expected to accelerate to 6.6% on the back of strong services sector activity, improvement in exports and pick-up in investment. Despite higher tariffs on some exports to the US, growth estimates for FY27 remain the same as in June, as the negative impact of higher tariffs will be offset by stronger than expected domestic demand.
The gross domestic product (GDP) growth estimate for FY26 is slightly lower than the 7.4% reported by the National Statistical Office (NSO) on January 7. For South Asia, growth is expected to increase to 7.1% in 2025, driven by strong economic activity in India. This has helped in reducing the impact of increasing trade tensions and increased policy uncertainty. The report says it will slow down to 6.2% in 2026, which shows the impact of US tariffs on India’s exports.
Global growth forecast
Global growth is expected to slow marginally from 2.7% in 2025 to 2.6% in 2026. The US economy is projected to grow from 2.1% to 2.2%, while China’s economic growth will decline from 4.9% to 4.4%. Indermeet Gill, Chief Economist and Senior Vice President for Development Economics at the World Bank Group, said that with each passing year, the global economy has become less capable of generating growth and appears more vulnerable to policy uncertainty. He further said that but economic growth and strength cannot remain isolated for long without causing damage to government finances and the loan market. In the coming years, the world economy will grow slower than during the difficult times of the 1990s, while public and private debt levels will be at record highs.
The report highlights potential risks to the South Asia outlook, including increased trade restrictions, uncertainty over global trade policies, tight financial conditions amid financial vulnerabilities, increasing social unrest, and more frequent or severe climate-related disasters.
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