World Bank Raises India's FY26 Growth Forecast To 6.5%, But Warns Of Tariff Risks

The World Bank has raised India's growth projection to 6.5% from earlier 6.3% for the current fiscal year. The bank also noted that the country is expected to remain fastest-growing major economy supported by consumption growth.

However, it also cautioned that a steep tariff of 50% by US on India is likely to have implications on the country in the coming year.

The upgrade comes after the bank earlier reduced the GDP growth forecast for 2026-27 to 6.3% from 6.5% earlier.

“India is expected to remain the world's fastest-growing major economy, underpinned by strong consumption growth, improved agricultural output and rural wage growth, “ said World Bank's South Asia Development Update.

Highlighting a broader trend across South Asian countries, the bank also said that, carefully sequenced tariff reductions, especially in the context of broader free trade agreements, could help boost private investment, increase competitiveness, and generate significant employment opportunities for the region.

The report further said growth in South Asia is expected to slow sharply from 6.6% in 2025 to 5.8% in 2026.

“Increasing trade openness and growing adoption of AI could be transformative for South Asia,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia. “Policy measures to facilitate the reallocation of workers across firms, activities, and locations can help channel resources to productive sectors and are critical for boosting investment and job creation in the region.”

Earlier on Sept. 29, Moody's Ratings said it expects India to remain the fastest growing G20 economy and has forecasted GDP growth at 6.5% in fiscal year 2026. In its report, the ratings agency also added that the 50% tariffs imposed by US President Donald Trump will likely have limited impact in the near-term period.