The World Bank has marginally raised its growth forecast for India to 6.6% for FY27 from 6.5% projected earlier, citing resilient domestic demand, even as it lowered its global growth outlook for 2026 to 2.5% amid escalating conflict in West Asia.
In its June 2026 Global Economic Prospects report, the multilateral lender also revised upward its FY28 growth estimate for India by 0.6 percentage point to 7.2%.
“Despite heightened uncertainty related to the conflict, economic activity in India remained robust early this year, supported by resilient domestic demand,” the World Bank said, adding that private consumption, particularly in rural areas, has remained strong, while urban demand is showing signs of recovery.
The Bank noted that collections from domestic sales taxes have continued to rise steadily. To contain inflationary pressures stemming from higher energy costs and shortages of agricultural inputs, especially fertilisers, India has undertaken several measures, including reductions in fuel taxes.
However, the World Bank expects growth to moderate from 7.7% in FY26 to 6.6% in FY27, reflecting a slowdown in private demand growth amid elevated energy prices and other input costs. It added that recent reductions in Goods and Services Tax (GST) rates should provide some support to consumer spending.
“Reduced US tariffs and the expected implementation of free trade agreements will likely mitigate the impact of weaker external demand due to the conflict, particularly on merchandise exports. Growth is then anticipated to rebound over the next two fiscal years, driven by firming domestic demand and a pickup in export growth,” it said.
The report also flagged fiscal pressures in several economies, including India, where fiscal deficits are expected to widen partly due to higher subsidy spending aimed at cushioning the impact of rising energy prices.
In India’s case, the World Bank said revenue losses resulting from tax reforms are likely to be partly offset by slower growth in capital expenditure and cuts in non-essential current spending.
“Over the forecast horizon, trade agreements and structural reforms undertaken to improve the business environment are set to support foreign direct investment inflows in India,” the World Bank said.
Globally, the Bank lowered its 2026 growth forecast to 2.5%, warning that the conflict in West Asia poses significant risks to the outlook. It said global growth could slow further to just 1.3% if energy supply disruptions intensify and trigger substantial stress in financial markets.
According to the report, the global economy grew 2.9% in 2025, 0.2 percentage point higher than the estimate released in January. However, the 2026 growth projection is now 0.1 percentage point lower than previously expected and would mark the weakest pace of expansion since the onset of the Covid-19 pandemic in late 2019.
TOPICSworld bankThis article was first uploaded on June twelve, twenty twenty-six, at thirty-two minutes past twelve in the am. © The Indian Express (P) Ltd