The World Bank on Tuesday raised India's economic growth forecast for the current financial year by half a percentage point, citing resilient domestic demand.
The institution expects India's FY27 GDP growth at 7.1% from 6.6% earlier.
World Bank expects strong momentum in the industrial and services sectors to continue.
“The country's growth potential remains strong, supported by a series of major reforms, such as labor code consolidation, GST reforms, tariff rationalization, the Insolvency Act, and infrastructure investments for both the real and digital economy,” World Bank said in its bi-annual South Asia Economic Update.
Strength in the rest of the economy is expected to make up for agricultural weakness, it added.
However, higher energy prices and El Niño can pose risk to the FY27 growth estimates.
According to the bank, South Asia region's GDP in 2026 is seen expanding by 6.9%, up from the previous forecast of 6.3%. Excluding India, the region's economic growth is expected at 3.6%, down from 4.1% earlier, largely because of a large downward revision for Bangladesh.
Meanwhile, the organisation noted that South Asia faces a challenging global environment, flagging risks of higher energy costs and El Nino.
ALSO READ: Govt May Rework Rs 10,000 Crore ATF Price Stabilisation Fund As Airlines Show No Interest: Sources
“The region is a major net oil importer and must contend with elevated energy prices that have pushed inflation up more than elsewhere. An unusually strong El Niño is straining the region's large agricultural sector. Strong growth in global AI-related trade and investment has largely passed over the region,” said World Bank.
The institution also warned that the South Asia's demographic tailwinds are “beginning to fade”, with growth in the working-age population seen dropping from 2.2% per year during 1960–2023 to 0.6% over the next 25 years.
AI Adoption Trajectories
India is rapidly adopting AI, but the depth and productivity impact of adoption remain a concern. Only 23% of Indian firms report using AI, compared with 43% in the US. The World Bank's AI Adoption Index, which measures the sophistication and integration of AI across business functions, puts India's score at 0.27, far below the US at 0.85.
The gains from AI also appear concentrated among a small group of firms, with nearly 75% of Indian companies expecting little or no productivity benefit. About 15% expect faster AI development to reduce revenue per worker by up to 10%, as they fear losing market share to more AI-enabled competitors.
AI adoption in India has accelerated since early 2025, even as growth in the US has slowed. However, it remains unclear whether the sophistication of AI use is keeping pace with basic adoption. The key challenge for South Asia may therefore be shifting from AI adoption to productive deployment.
ALSO READ: Catch Stock Market Live Updates Here
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.