The World Bank has revised India’s FY26 growth projection to an estimated 7.2 per cent, thanks to resilient domestic demand despite global headwinds. For the next fiscal year (FY2026-27), the agency projects
an estimated growth rate at 6.5 per cent.
In its latest Global Economic Prospects report, the agency argued that the impact of higher US tariffs on India will be subdued by stronger-than-anticipated momentum in domestic demand.
“In SAR, the projected slowdown in 2026 mainly reflects the impact of increased U.S. tariffs on India’s goods exports. Growth in SAR is then set to rebound in 2027, as exports improve and domestic demand firms, aided by strong services activity as the effects of political uncertainty dissipate in several economies,” the World Bank said.
The agency, however, cautioned that high US tariffs are set to dampen India’s goods exports and weigh on overall growth, despite the strong growth of services exports.
Highlighting the issue of large fiscal deficit and spending pressures, the World Bank hoped that India’s fiscal deficit would be gradually reduced through consolidation policies.
On Poverty, the agency expects India to reduce it, saying that still-rapid growth led by India is expected to allow further significant convergence, accompanied by a notable drop in poverty rates.
Growth in SAR is expected to slow to 6.2 percent in 2026, mainly reflecting the impact of increased U.S. import tariffs on India’s export growth, the World Bank added. “The forecast for this year has been downgraded by 0.2 percentage point compared with June projections. The revision reflects higher U.S. import tariffs than previously assumed and updated assumptions about the timing of the tariff effects—from 2025 to early- to mid-2026—and of subsequent recovery.“
