World Bank Projects 7.1% Average Growth for India in FY28-FY29 Amid Oil Volatility

India is in a relatively strong position to deal with the ongoing global energy crisis caused by tensions in the Middle East, according to the World Bank. The multilateral agency said the country’s risks are well cushioned by strong buffers, including high foreign exchange reserves, available fiscal space, and a solidly capitalised banking system.The World Bank also projected that India’s economy will grow at an average rate of 7.1% during the financial years 2027-28 and 2028-29. This positive outlook comes just a day after the bank raised its growth forecast for FY27 to 6.6% from the earlier estimate of 6.3%.Speaking at an event organised by the National Council of Applied Economic Research (NCAER), Aurelien Kruse, the World Bank’s lead economist

for India, said the country has managed the current challenges quite effectively.“This is testimony to the fact that the buffers India had at the time of crisis were very strong, and the authorities have struck the right balance between managing supply without resorting to massive rationing,” he noted.Kruse added that while risks from the global energy shock are significant, they are currently tilted more towards the downside. He praised the government’s measured approach in handling the situation so far.Optimism on New Trade DealsThe World Bank also expressed confidence in the recently signed trade agreements with the European Union and the United Kingdom. South Asia chief economist Franziska Ohnsorge said these pacts could give a meaningful and sustained boost to Indian exports. They are expected to reduce prices for consumers and support household incomes across different income groups.“These trade agreements are expected to significantly expand market access, potentially increasing the share of global GDP accessible through preferential trade from below 20% to nearly 38%,” Ohnsorge pointed out.Challenges in Job CreationWhile the overall outlook remains positive, the World Bank sounded a note of caution on industrial policy and employment in South Asia. Ohnsorge noted that countries in the region, including India, have been using industrial policies for the past decade to create more and better jobs, particularly in manufacturing. However, the results have been mixed. “Inward restricting policies have restricted imports significantly over several years, but export promoting policies have not significantly promoted exports,” she observed. She highlighted that it is becoming increasingly difficult for countries in the region to generate quality employment opportunities. With around 28 crore young people expected to enter the workforce over the next 10-15 years, the pressure to create good jobs will only grow. Ohnsorge suggested that one way forward is to remove unnecessary obstacles in the adoption of artificial intelligence and other new technologies. She believes that if businesses are allowed to make productive use of AI, it can help generate more and better jobs in the coming years.Strong Buffers Provide ComfortAccording to the World Bank’s analysis, global oil prices are still significantly high due to issues between the US and Iran and the uncertainty in the Straits of Hormuz. Higher costs for energy have raised concerns about inflation, not just in India but also for many countries seeking to develop their economies. India's large amount of foreign government currency (the most of any nation in the world), sound fiscal policy, and strong banks represent major advantages for the nation and give it a better chance of managing these external shocks than other nations do. The World Bank currently continues to maintain optimism about the future of India's economy, provided that the risks are managed cautiously, and the reforms are made for trade, use of technology, and generating employment continue.