India growth forecast: World Bank sees 6.6% in FY 2026-27 as costs rise

The World Bank said India is set to stay the world’s fastest-growing major economy. Output is projected to rise 6.6 per cent in fiscal year 2026-27. This marks a clear slowdown from 7.7 per cent in the previous year. The estimate came in the World Bank’s Global Economic Prospects report released on Thursday.

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The report linked the softer pace to weaker private demand growth. It said higher energy prices and other input costs are weighing on spending. The forecast covers April 2026 to March 2027. Even so, the World Bank expects India’s growth to improve later, as domestic and external conditions become more supportive.

World Bank India growth forecast and demand outlook

Despite uncertainty tied to the conflict, the World Bank said activity stayed strong early this year. It credited resilient domestic demand for supporting growth. The report also noted firm private consumption in rural areas. It added that urban demand has been recovering, helping overall spending conditions.

The World Bank said tax collections from domestic sales have risen steadily. It also listed steps taken to limit price pressure from costlier energy. It cited shortages of agricultural products, especially fertilizers, as another factor. Measures in India included a reduction in fuel taxes, according to the report.

The report said a reduction in Goods and Services Tax rates should provide some support to consumer demand. It added that growth is expected to rebound to 7.2 per cent in fiscal 2027-28. The World Bank also said growth should rise over the next two fiscal years. It expects firmer domestic demand and stronger exports.

World Bank India growth forecast and trade risks

The World Bank said weaker external demand due to the conflict could hurt trade. It flagged merchandise exports as a key channel. The report said reduced US tariffs may limit the damage. It also said planned free trade agreements could help. These factors may offset some export pressure.

World Bank India growth forecast in EMDEs and South Asia

Beyond India, the World Bank said per capita growth in Emerging Markets and Developing Economies in 2026 may weaken. It would be the slowest since the pandemic, it said. The conflict and remaining disruptions are affecting EMDEs in different ways. These pressures are expected to shape near-term incomes.

The report said EMDEs excluding China and India face a tougher income path. It expects subdued per capita income growth in those economies. This could result in almost a decade of lost income convergence with advanced economies by 2028. The World Bank presented this as a medium-term risk.

For South Asia, the World Bank expects growth to ease to 6.3 per cent in 2026. It linked this mainly to the conflict in the Middle East. The report pointed to higher energy prices and reduced oil and gas supplies. It also cited disruptions to remittances and tourism as added headwinds.

With inputs from PTI