World Bank upgrades India's economic growth forecast to 6.5% for FY27
New Delhi, Jan 13, 2026
It highlighted AI and possible resolution of trade disputes as upside risks
The World Bank on Tuesday upgraded its FY27 growth forecast for India to 6.5 per cent, compared to 6.3 per cent projected in October last year, on the back of firmer domestic demand and an export performance that has proved more resilient than earlier expected.
Compared to its forecast in June last year, however, the growth projection for India remained unchanged at 6.5 per cent for FY27.
“India is expected to maintain the fastest growth rate among the world’s largest economies. Despite higher tariffs on certain exports to the United States — which accounts for about 12 per cent of India’s merchandise exports — the growth forecast has remained unchanged relative to June projections, primarily because adverse impacts of higher tariffs will be offset by stronger momentum in domestic demand and more resilient exports than previously anticipated,” the World Bank said in its latest Global Economic Prospects report.
Talking about the upside risks to the forecast, the report points to a possible resolution of trade disputes, including a partial reversal of US tariffs, in several economies, including India. Bilateral negotiations to lower trade barriers and restrictions could lead to faster export growth and attract more foreign capital than assumed in the baseline, the World Bank said.
“Business and consumer confidence could also be boosted, which would support stronger-than-expected increases in investment and consumption,” it added.
Another upside risk flagged is stronger investment in new technologies, including artificial intelligence, in India, which could lift productivity and employment growth faster than expected. Such gains are projected to raise India’s potential growth and enhance the economy’s resilience to external shocks.
The international lending organisation expects growth to inch up to 6.6 per cent in FY28, underpinned by robust services activity, a recovery in exports and a pick-up in investment.
The report highlights that despite easier global financial conditions, growth in credit to the private sector has been restrained in several economies in the South Asian region, including India, either by policies designed to contain financial risks or on account of weakened demand. “Credit growth has continued to be moderated in India by macroprudential policies aimed at containing banking sector risks, despite increases in financing from non-bank sources,” it added.
Fiscal consolidation is projected to continue in India over the forecast horizon, with the effects of tax cuts outweighed by a decline in current spending, resulting in a gradual reduction in the public debt-to-GDP ratio.
In India, surpluses in services trade are expected to partly offset merchandise trade deficits, while inflation is expected to converge to the target set by the Reserve Bank of India in FY27, assuming stable seasonal conditions contain food price inflation.
The global economy is projected to expand 2.6 per cent in FY27, down from 2.7 per cent in FY26, as front-loading fades and tariffs intensify, dampening trade and manufacturing. In particular, trade growth is set to weaken as firms scale back inventory accumulation.
The World Bank estimated FY26 growth at 7.2 per cent, supported by robust domestic demand, strong private consumption, tax reforms and improvements in real household earnings in rural areas. The first advance estimates released by the statistics ministry last week estimated the economy to grow 7.4 per cent in 2025-26.
“Alongside resilient services exports, merchandise exports rose in November, despite increases in US import tariffs on many Indian goods. This partly reflects buoyant demand from the United States and other trading partners, supported by efforts to diversify export markets to increase resilience,” the report added.
[The Business Standard]
