Washington, D.C. – The World Bank projects India's economy to grow at 7.2% in the fiscal year 2025-26, according to its latest Global Economic Prospects report released Tuesday. This robust growth forecast underscores India's position as one of the fastest-growing major economies in the world, driven by strong domestic demand despite rising global trade tensions.
The World Bank's projection highlights the resilience of the Indian economy, which has helped to bolster overall growth in South Asia in 2025, offsetting the impact of global policy uncertainty and trade frictions. South Asia's growth strengthened to 7.1% in 2025, primarily due to India's strong economic activity.
India's expansion is primarily fueled by robust domestic demand, including strong private consumption. This is supported by earlier tax reforms and improvements in real household earnings, particularly in rural areas. The World Bank anticipates that India's growth will slightly moderate to 6.5% in FY2026-27, assuming that higher U.S. import tariffs remain in place. However, growth is expected to edge up to 6.6% in FY2027-28, driven by strong services activity, a recovery in exports, and improved investment flows.
Even with potential impacts from higher tariffs on exports to the United States, India's growth forecast remains unchanged from earlier projections. The bank anticipates that the adverse effects of these tariffs will be offset by stronger momentum in domestic demand than previously expected. Merchandise exports also rose in November, despite a 50% US import tariff on many Indian goods, which the World Bank says, "partly reflects buoyant demand from the United States and other trading partners, supported by efforts to diversify export markets to increase resilience".
The World Bank noted that India remains the primary growth engine across South Asia. Excluding India, growth in South Asia is forecast to strengthen to 5.0% in 2026 and 5.6% in 2027, while the region as a whole is expected to slow to 6.2% in 2026 before rebounding.
In comparison, the World Bank projects the global economy to expand by 2.6% in FY27, a decrease from 2.7% in FY26, as front-loading fades and tariffs intensify, dampening trade and manufacturing. For the current fiscal year ending March 31, 2026, India's GDP is estimated to grow at 7.2%, supported by strong private consumption, earlier tax reforms, and improvements in real household earnings in rural areas.
The World Bank's report suggests that India's economic resilience and strong domestic demand will continue to drive growth in the coming years, positioning it as a key player in the global economic landscape. However, the report also highlights the importance of strengthening productivity and job creation in developing economies like India to sustain long-term growth. To achieve its aspirations of reaching high-income status by 2047, India will need to grow by 7.8 percent on average over the next 22 years.
