The World Bank Group has raised India's GDP growth forecast for fiscal year 2026-27 by 10 basis points to 6.6%, even as it flagged risks stemming from the ongoing West Asia conflict and elevated global energy prices.
In its latest South Asia Economic Update, released Wednesday, the World Bank said India continues to underpin regional growth, supported by resilient domestic demand and policy measures such as tariff cuts and trade agreements.
“Growth is projected to decelerate to 6.6% in FY27, reflecting headwinds from the Middle East conflict,” the report said. The revised estimate is slightly higher than its previous projection of 6.5%.
India's economy is estimated to have accelerated from 7.1% in FY25 to 7.6% in FY26, driven by strong private consumption, low inflation, and GST rationalisation, alongside steady export performance, the report added.
However, the multilateral lender cautioned that momentum could ease going forward.
“Higher energy prices are expected to put upward pressure on prices and constrain households' disposable income,” it said, warning of rising inflation driven by food and fuel costs.
The World Bank also noted that government consumption may soften as higher subsidy outlays, particularly for fuel and fertilisers, strain fiscal space. Investment growth, too, is likely to moderate amid elevated uncertainty and rising input costs.
At the regional level, South Asia's growth is projected to slow to 6.3% in 2026 from 7% in 2025 due to disruptions in global energy markets, before recovering to 6.9% in 2027.
“Despite the near-term slowdown, South Asia continues to grow faster than other emerging-market and developing economies,” the report said, while cautioning that the outlook remains “exceptionally uncertain.”
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The World Bank added that a “prompt resolution” of geopolitical tensions would help lift growth prospects, even as slower expansion in key global markets such as the United States and European Union could weigh on export demand.
While India is expected to remain the region's primary growth driver, sustaining momentum will depend on managing inflation pressures, supporting consumption, and navigating global uncertainties.
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