World Bank Raises India’s FY27 Growth Outlook to 6.5% for FY27

• World Bank raises India’s FY27 growth forecast to 6.5%, citing strong domestic demand and resilient exports.

• India remains the fastest-growing major economy despite higher U.S. tariffs.

• Easing trade tensions and tariff rollbacks could boost exports and foreign investment.

• Technology and AI investments may lift productivity and jobs.

• FY28 growth seen at 6.6%; inflation expected near RBI target.

The World Bank has revised upward its economic growth projection for India for the 2026–27 financial year (FY27), reflecting stronger-than-anticipated domestic activity and a more robust export performance. In its latest assessment, the institution now expects India’s economy to expand by 6.5 per cent in FY27, slightly higher than the 6.3 per cent forecast issued in October last year. The revised estimate, however, is unchanged from the projection released in June.

According to the World Bank’s Global Economic Prospects report, India is set to retain its position as the fastest-growing major economy globally. The lender noted that even though certain Indian exports to the United States—India’s destination for roughly 12 per cent of its merchandise shipments—are facing higher tariffs, the overall growth outlook remains intact. This is largely because the drag from tariffs is expected to be balanced by solid domestic demand and exports that have held up better than previously anticipated.

The report also outlines several potential upside factors that could lift growth beyond the baseline forecast. A key possibility is the easing of global trade tensions, including a partial rollback of U.S. tariffs affecting multiple economies such as India. The World Bank said that progress in bilateral talks aimed at reducing trade barriers could accelerate export growth and draw in greater foreign investment than currently assumed.

Improved trade conditions could also have a positive knock-on effect on sentiment. Higher levels of business and consumer confidence, the report suggests, may lead to stronger investment activity and increased household spending. Another positive risk highlighted is a faster pace of investment in emerging technologies, particularly artificial intelligence, which could boost productivity and job creation more quickly than expected.

Such developments would not only raise India’s long-term growth potential but also strengthen the economy’s ability to withstand external shocks. Looking ahead, the World Bank expects India’s growth rate to edge up further to 6.6 per cent in FY28, supported by continued momentum in the services sector, a rebound in exports, and a recovery in investment.

The report also points out that despite an easing in global financial conditions, private sector credit growth across South Asia, including India, has remained relatively subdued. In India’s case, lending has been tempered by regulatory measures aimed at safeguarding the banking system, even as financing from non-bank sources has increased.

On the fiscal front, the World Bank anticipates that India will stay on a consolidation path over the forecast period. While tax reductions are expected to weigh on revenues, this impact is projected to be more than offset by lower current spending, leading to a gradual decline in the public debt-to-GDP ratio.

Externally, India’s surplus in services trade is likely to continue offsetting part of the deficit in goods trade. Inflation is also expected to move closer to the Reserve Bank of India’s target by FY27, provided normal seasonal patterns help keep food prices in check.

Globally, the World Bank forecasts economic growth to slow slightly to 2.6 per cent in FY27 from 2.7 per cent in FY26, as the effects of front-loaded demand fade and rising tariffs weigh on trade and manufacturing. Trade expansion is expected to soften further as companies reduce inventory accumulation.

For FY26, the World Bank estimates India’s growth at 7.2 per cent, driven by strong domestic demand, healthy private consumption, tax reforms, and improving real incomes in rural areas. This compares with the statistics ministry’s first advance estimate of 7.4 per cent growth for 2025–26.

The report also notes that India’s export performance has shown resilience. Merchandise exports increased in November despite higher U.S. import duties on several Indian products, supported by strong demand from the United States and other markets, as well as efforts to diversify export destinations and enhance resilience.