The World Bank has marginally raised India’s growth forecast for FY2026-27 to 6.6 per cent, while cautioning that ongoing geopolitical tensions in West Asia could pose significant risks to the economic outlook.
In its latest South Asia Economic Update, the World Bank said India’s growth is estimated to have accelerated from 7.1 per cent in FY2024-25 to 7.6 per cent in FY2025-26, supported by strong domestic demand and resilient exports.
However, growth is expected to moderate in the following fiscal. “Growth is projected to decelerate to 6.6%, reflecting headwinds from the Middle East conflict,” the report said.
The projection is broadly in line with other estimates, though slightly more optimistic than some. The Reserve Bank of India has pegged growth at 6.9 per cent, while the Organisation for Economic Co-operation and Development has projected 6.1 per cent. Moody’s Ratings has taken a more cautious stance, estimating growth at around 6 per cent.
The report highlighted that private consumption remains a key driver of growth, aided by relatively low inflation and the rationalisation of the Goods and Services Tax (GST). These factors are expected to continue supporting demand, particularly in the first half of the fiscal year.
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At the same time, the World Bank warned that rising global energy prices, driven by the ongoing West Asia conflict, could push up inflation and erode household purchasing power. Higher fuel costs may also increase transportation expenses and impact food prices, given India’s reliance on imported fertilisers.
Government consumption growth is also expected to soften, with higher subsidy outlays on cooking fuel and fertilisers likely to constrain fiscal space.
Investment activity may moderate as well, amid rising input costs and heightened global uncertainty. While improved market access to the United States and the European Union could support exports, weaker growth in key trading partners may offset these gains.
The World Bank had earlier projected India’s growth at 6.5 per cent for FY2026-27 in its January Global Economic Prospects report, indicating a slight upward revision in the latest assessment.
It noted that the economic impact of the ongoing conflict in West Asia remains uncertain, with various forecasters revising their estimates within a range of 5.9 per cent to 6.7 per cent.
Recent geopolitical tensions involving the United States, Israel and Iran, despite a temporary two-week ceasefire, continue to cast a shadow over global energy markets.
Moody’s Ratings has already lowered its forecast, warning that prolonged instability could dampen growth while adding to inflationary pressures, underlining the fragile external environment facing the Indian economy.
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