The World Bank has increased India's economic growth forecast for the fiscal year 2025-26 (FY26) to 6.5%, a 0.2% increase from the 6.3% projected in June. This revision reflects the country's strong domestic demand, better-than-expected agricultural output, and rising rural wages.
In its biannual South Asia Development Update (October 2025), the World Bank noted that India is expected to maintain its position as the world's fastest-growing major economy, primarily driven by strong consumption growth. The government's ongoing reforms to the Goods and Services Tax (GST), which aim to reduce the number of tax brackets and simplify compliance, are also expected to bolster economic activity.
While the FY26 forecast has been revised upward, the World Bank has slightly lowered its growth estimate for FY27 by 0.2 percentage points to 6.3%. This adjustment considers the potential impact of higher-than-expected tariffs imposed by the United States on approximately three-quarters of India's goods exports.
The World Bank's report highlights that South Asia's overall growth is likely to slow to 5.8% in 2026, down from 6.6% in 2025. This slowdown is attributed to trade disruptions and the emergence of new technologies, including Artificial Intelligence (AI), which are creating uncertainties for the region.
Despite these challenges, India's economic performance in the first quarter of FY26 exceeded expectations, with real GDP growth accelerating to 7.8% year-on-year. This growth was fueled by strong private consumption and investment, supported by lower-than-expected prices. Investment momentum remained firm, driven by public infrastructure spending, robust credit growth, and monetary easing.
Other organizations have also offered their forecasts for India's economic growth. The Reserve Bank of India (RBI) has projected a slightly lower growth rate of 6.8%, citing strong consumption, investment, and public spending, along with a favorable monsoon season and the GST overhaul. The Organisation for Economic Co-operation and Development (OECD) expects a 6.7% growth, supported by solid domestic demand and a stable external sector. S&P Global and the Asian Development Bank (ADB) have both forecast growth at 6.5%, with the ADB noting potential headwinds from new US tariffs on exports. Fitch Ratings is the most optimistic, projecting a 6.9% growth rate due to strong momentum in services and resilient household and government spending.
The World Bank's report also addresses the potential impact of AI on South Asia's economy. It estimates that approximately 22% of jobs in the region overlap with tasks that could be automated or augmented by generative AI. While the predominantly low-skill, agricultural workforce may be relatively insulated, younger, more educated workers could face greater challenges.
The World Bank's revised forecast reflects a mix of optimism and caution regarding India's economic outlook. While strong domestic demand and ongoing reforms are expected to drive growth, potential risks from trade disruptions and emerging technologies need to be carefully monitored.
