New Delhi: India will retain its position as the world’s fastest-growing major economy in the current fiscal year, though at a slower pace, the World Bank
said on Thursday. In its Global Economic Prospects report, the multilateral institution projected India’s GDP growth at 6.6% for FY 2026-27, a notable step down from 7.7% in the previous year, attributing the moderation primarily to higher energy prices and rising input costs weighing on private demand.
“Growth in India is projected to moderate to 6.6 per cent in fiscal year 2026/27, reflecting a slowdown in private demand growth owing to higher energy prices and other input costs,” the World Bank said, PTI reported.
What is supporting India’s economy
Despite these challenges, the World Bank said India’s economy remained strong in the early part of the year, supported by steady domestic demand. Private consumption has been particularly strong in rural areas, while urban demand has also been recovering. Domestic tax collections have grown steadily and the government has rolled out several measures to reduce the impact of higher energy costs, including reductions in fuel taxes. A reduction in GST rates is also expected to provide some support to consumer spending, the report said.
India’s growth expected to pick up in FY28
The World Bank projected India’s growth to recover to 7.2% in FY 2027-28, driven by firming domestic demand and a pickup in export growth. “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 said.
At the broader regional level, South Asia’s growth is expected to soften to 6.3% in 2026, reflecting the adverse spillovers from the West Asia conflict including higher energy prices, reduced oil and gas supplies and disruptions to remittances and tourism. In developing and emerging economies other than China and India, income growth is expected to remain weak. As a result, these countries may fall further behind advanced economies, losing nearly a decade of progress in narrowing the income gap by 2028.
