The World Bank on Tuesday upgraded India’s economic growth forecast for FY27, citing resilient domestic demand and continued strength in key sectors of the economy.
In its latest South Asia Economic Update, the multilateral institution raised India’s GDP growth projection by 0.5 percentage points to 7.1 per cent, from its earlier estimate of 6.6 per cent.
The World Bank said India’s growth momentum remains robust, supported by sustained expansion in the industrial and services sectors.
It noted that the country’s long-term growth prospects continue to be underpinned by a series of structural reforms, including labour code consolidation, Goods and Services Tax (GST) reforms, tariff rationalisation, the Insolvency and Bankruptcy Code, and significant investments in both physical and digital infrastructure.
According to the report, strength in the broader economy is expected to offset weakness in the agricultural sector, helping India maintain a strong growth trajectory in the current financial year.
The institution said domestic demand continues to provide a solid foundation for economic activity despite external uncertainties.
However, the World Bank cautioned that risks to the growth outlook remain. Elevated energy prices and adverse weather conditions linked to the El Niño phenomenon could pose challenges to economic performance and inflation management in the coming months.
At the regional level, the World Bank revised upward its forecast for South Asia’s economic growth in 2026 to 6.9 per cent, compared with a previous estimate of 6.3 per cent.
The stronger outlook has been largely driven by India’s performance. Excluding India, the region’s growth forecast was lowered to 3.6 per cent from 4.1 per cent, mainly due to a sharp downward revision in Bangladesh’s growth expectations.
The report highlighted that South Asia faces a difficult global environment marked by rising energy costs and climate-related risks. As a major net importer of crude oil, the region remains vulnerable to high energy prices, which have pushed inflation higher than in many other parts of the world. In addition, an unusually strong El Nino episode is placing pressure on the region’s large agricultural sector.
