World Bank trims India’s FY27 growth forecast on US tariffs; ups China outlook

The World Bank on Tuesday warned that higher US tariffs on Indian exports are likely to slow South Asia’s growth next year, even as it raised forecasts for India and China for FY26.

The lender revised India’s growth projection for FY26 to 6.5%, up from 6.3% estimated in June, citing strong public investment and resilient domestic demand.

However, it trimmed India’s FY27 forecast to 6.3% from 6.5%, warning that US tariffs will dampen exports and weigh on the region’s outlook.

US President Donald Trump imposed a 50% tariff on nearly three-quarters of Indian exports—affecting about $50 billion worth of goods, including textiles, gems and jewellery, and seafood.

The World Bank said the move will drag South Asia’s growth to 5.8% in FY27, down from 6.6% in FY26, as weaker exports and foreign exchange pressures hit India, the Maldives and Nepal.

In parallel, the World Bank raised its FY26 growth forecast for China to 4.8% from 4% projected in April, aligning more closely with Beijing’s official target of around 5%. The lender said the upgrade reflects steady domestic demand and policy support despite global trade uncertainty following the US tariff hikes.

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To cushion the domestic impact of tariffs, the Indian government last month announced sweeping tax cuts across consumer goods and automobiles—the biggest overhaul since the 2017 GST reform—while maintaining heavy infrastructure spending.

“Growth in South Asia is expected to moderate as the boost from post-pandemic recovery fades and new trade barriers emerge,” the World Bank said, adding that India’s policy momentum remains key to sustaining regional growth.