World Bank Raises India's 2025-26 GDP Growth Forecast to 6.5%
The World Bank has revised its GDP growth forecast for India for the 2025-26 fiscal year upward to 6.5% from 6.3%, citing strong domestic consumption and investment. In its latest South Asia Development Update, the bank stated that India is expected to remain the world's fastest-growing major economy. However, it cautioned that US tariffs could impact future growth, downgrading its forecast for the 2026-27 fiscal year to 6.3% from a previous estimate of 6.5%.
Unpacked:
Key drivers include robust domestic consumption, increased private investment, a resilient consumer base, favorable government policies, and a digitally skilled workforce. Easing inflation and improved rural conditions further support growth, while strong private capital expenditures and innovation in tech sectors contribute significantly.
US tariffs can reduce demand for Indian exports, affecting sectors like textiles and IT services. This could slow GDP growth by limiting trade opportunities and adversely impacting manufacturing, employment, and foreign investment inflows.
Persistent challenges include high food inflation, sluggish job growth, trade deficits, a slow-moving manufacturing sector, and the need for deeper structural reforms. Without addressing these, sustaining high growth rates and achieving development goals will be difficult.
India is expected to remain the world’s fastest-growing major economy, outpacing peers like China and the US. Its growth rate is projected around 6.5% for 2025-26, while most other large economies anticipate significantly lower rates due to slower domestic demand and external pressures.