World Bank raises India’s FY27 growth forecast to 7.1% on strong industrial, services activity

The World Bank on Tuesday raised its forecast for India’s economic growth by 0.5 percentage points to 7.1%, citing continued strength in industrial and services activity and the impact of structural reforms.

In its latest South Asia Economic Update, the World Bank projected India's growth at 7.8% in 2025-26, up from 7.2% in 2024-25. It expects growth to edge up to 7.2% in 2027-28.

The World Bank's forecast for India for 2026-27 is 0.5 percentage points higher than its previous projection.

The report said India's growth potential remains strong, supported by major reforms, including consolidation of labour codes, GST reforms, tariff rationalisation, the Insolvency Act and infrastructure investments in both the physical and digital economy.

"Strength in the rest of the economy is expected to make up for agricultural weakness," it said.

The World Bank, however, flagged risks to agriculture and rural demand from a larger-than-expected monsoon deficit, with much of the country receiving less rainfall than usual.

For South Asia as a whole, the World Bank expects growth to rise to 6.9% in 2026 from 6.8% in 2025, before slowing to 6.7% in 2027.

The region's growth is being supported by strong domestic demand, robust remittance inflows and structural reforms, the report said.

However, elevated energy prices, a severe El Nino episode and a sharp reversal in global artificial intelligence investment could weigh on growth next year.

The World Bank said South Asia needs to develop new engines of growth to sustain momentum and create more jobs.

"South Asia has demonstrated remarkable resilience in a challenging global environment. But the region needs to invest in new drivers of growth to sustain momentum and create more jobs," World Bank Vice President for South Asia Johannes Zutt said.

He said countries should invest in skills, infrastructure and an enabling environment to allow workers and businesses to harness the potential of rapidly growing AI-linked global value chains.

The report said AI adoption in South Asia is increasing but remains well below advanced economies.