World Bank Predicts India to Remain at Forefront of Economic Growth

According to the latest Global Economic Prospects report from the World Bank, India is positioned to be one of the fastest-growing major economies, with an anticipated growth rate of 7.2 percent for FY 2025–26. This optimistic outlook is largely fueled by robust domestic demand, despite escalating global trade tensions and uncertainties surrounding policies.

The World Bank emphasized that India's economic stability has been pivotal in enhancing overall growth within South Asia. The region's growth is projected to rise to 7.1 percent in 2025, primarily attributed to India's impressive performance, balancing the effects of global trade issues.

The report clarified that Pakistan and Afghanistan are categorized separately under the Middle East and North Africa, thus excluded from South Asia's economic metrics.

Robust private consumption, bolstered by prior tax reforms and increasing real incomes—particularly in rural areas—is driving India's economic growth. Continued consumer demand remains a vital support for this growth.

Looking forward, growth is expected to moderate to 6.5 percent in FY 2026–27, contingent on the maintenance of elevated US tariffs. However, a rise to 6.6 percent is projected in FY 2027–28, aided by a strong services sector, a recovery in exports, and enhanced investment flows.

Despite potential challenges from increased US tariffs on certain exports, India's growth forecast remains stable, primarily because stronger domestic demand is anticipated to alleviate the adverse effects of global trade barriers.

India continues to be a critical growth engine for South Asia. Excluding India, the region's growth is set to increase to 5.0 percent in 2026 and 5.6 percent by 2027. Overall, South Asia's growth is expected to slow to 6.2 percent in 2026, before witnessing a rebound.

On the international front, the World Bank noted that accommodative financial conditions and fiscal support in key economies are mitigating the adverse effects of weak trade and demand. However, it warned that the 2020s could potentially become the slowest growth period globally since the 1960s.

Indermit Gill, the Chief Economist at the World Bank, cautioned that although the global economy shows resilience against policy uncertainties, a slowdown combined with peak levels of public and private debt could pressure public finances and credit markets.

For developing economies like India, the report highlighted the critical need for enhancing productivity and generating jobs. It noted that per capita income growth in these nations is projected to reach only 3 percent in 2026, falling below long-term averages, which could hinder income convergence with advanced economies.