The World Bank has raised India's growth forecast for FY27 by 10 basis points to 6.6%, citing resilient domestic demand and stronger export prospects. According to the World Bank's latest Global Economic Prospects report, this upgrade reflects the multilateral lender's assessment of India's economic resilience despite global headwinds. The World Bank also raised India's GDP growth forecast for FY28 by 60 basis points to 7.2%, indicating expectations for a strong recovery after the current slowdown. The World Bank's projection aligns with the Reserve Bank of India's (RBI) growth outlook, though it remains lower than the 7.7% growth estimated by the government for the previous financial year. As per the World Bank, "despite heightened uncertainty related to the conflict (in West Asia), economic activity in India remained robust early this year, supported by resilient domestic demand. Private consumption, particularly in rural areas, has been strong, with urban demand recovering."
The World Bank has lowered its global growth forecast for 2026 to 2.5%, citing the economic fallout from the ongoing conflict in the Middle East, rising energy prices and heightened uncertainty across markets. In its latest Global Economic Prospects report, the lender warned that global growth could slow further to 1.3% if energy supply disruptions become more severe and trigger significant stress in financial markets. Global growth is expected to ease from 2.9% in 2025 to 2.5% in 2026, marking the weakest expansion since the Covid-19 pandemic. The closure of the Strait of Hormuz has pushed up oil and gas prices, while fertiliser costs have also risen sharply, raising concerns about food supply disruptions. The World Bank expects Brent crude oil to average $94 per barrel this year, up 36% from 2025, and warned that if energy disruptions persist and oil averages $115 per barrel, global growth could slow to 2.1% while inflation could rise to 4.4%. For South Asia, the World Bank projected growth of 6.3% in 2026, citing the effects of the conflict in West Asia, including higher energy prices, disruptions to oil and natural gas supplies, and pressure on remittances and tourism.
India's economy delivered stronger-than-expected growth in fiscal 2026, with GDP expanding 7.7% for the full year, surpassing the second advance estimate of 7.6%. According to the National Statistical Office data released on June 5, 2026, Q4 GDP growth eased to 7.8% from 8% in the preceding quarter, but remained well above the average pace recorded over the previous 10 quarters. As noted by CRISIL's chief economist Dharmakirti Joshi, the growth was achieved despite headwinds from the West Asia conflict that escalated during March. Deloitte India's economist Rumki Majumdar described the expansion as broad-based and underpinned by both demand and production, with gross value added (GVA) growth of 7.9% exceeding GDP growth and reflecting strength across services, manufacturing and construction sectors. The World Bank noted that economic activity in India remained robust in the early part of the year, supported by resilient domestic demand, with private consumption, particularly in rural areas, being strong and urban demand recovering. The report further highlighted that steady growth in tax collections from domestic sales has contributed to the overall economic resilience. Looking ahead, the World Bank expects India's growth to rebound in FY28 and FY29 after the West Asia war-led slowdown, supported by firm domestic demand and a pickup in export growth. Despite the moderation to 6.6% in FY27, India is likely to retain its position as the world's fastest-growing major economy.
The World Bank report indicates that fiscal deficits in several South Asian economies, including India, are expected to widen due to higher subsidies aimed at cushioning the impact of rising energy prices. In India's case, the government faces limited fiscal space in FY27 due to a likely expenditure overshoot of at least ₹2 trillion on food and fertiliser subsidies, and a revenue shortfall of more than ₹1.2 trillion following a cut in special additional excise duty on fuel and tax exemptions for foreign portfolio investors. The World Bank noted that in several economies, including Bangladesh, Bhutan, India and Maldives, fiscal deficits are anticipated to rise, partly owing to increases in subsidies intended to counteract the surges in energy prices. The World Bank also projected a weakening of external balances across the region this year due to higher energy import bills and lower tourism revenues. However, over the medium term, trade agreements and business-environment reforms are expected to support foreign direct investment inflows into India. According to the World Bank, reduced US tariffs and the expected implementation of free trade agreements will likely mitigate the impact of weaker external demand due to the conflict, particularly on merchandise exports. The report added that growth is then anticipated to rebound over the next two fiscal years, driven by firming domestic demand and a pickup in export growth.
The World Bank highlighted that India's growth is expected to rebound in FY28 and FY29 after the West Asia war-led slowdown, supported by firm domestic demand and a pickup in export growth. The multilateral body noted that trade agreements, along with structural reforms undertaken to improve the business environment, are also likely to support foreign direct investment (FDI) inflows into India. India's FTA with Oman came into force this month, and deals with at least two more trading partners — the European Union and New Zealand — are expected to be implemented soon. The World Bank expects global economic activity to recover in 2027 and 2028 as energy supplies normalise, monetary easing resumes and trade strengthens. Despite the current challenges, the World Bank's upgraded forecast reflects confidence in India's economic resilience and the expected recovery trajectory as global conditions stabilize. In per capita terms, growth in Emerging Markets and Developing Economies (EMDEs) in 2026 is projected to slow to its weakest pace since the pandemic, with the conflict and lingering disruptions impacting EMDEs to varying degrees. In EMDEs, excluding China and India, subdued per capita income growth is expected to lead to nearly a decade of lost income convergence with advanced economies by 2028.
