India to grow 6.5% in FY27; World Bank pegs FY26 growth at 7.2%

World Bank projects economy to grow 6.5%

• India's economy to grow 6.5 percent in FY27, easing from 7.2 percent this fiscal
• World Bank cites resilient domestic demand offsetting US tariff impacts
• Medium-term outlook positive with strong recovery in services and investment

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India’s economy is expected to grow 6.5 percent in FY27, easing from an estimated 7.2 percent in the current fiscal, the World Bank said on January 13, underlining that resilient domestic demand will continue to anchor growth even as external headwinds intensify.

In its latest Global Economic Prospects report, the multilateral lender noted that the impact of higher US tariffs on Indian exports is likely to be cushioned by stronger-than-anticipated momentum in domestic demand.

“Despite higher tariffs on certain exports to the United States, the growth forecast has remained unchanged relative to June projections, primarily because the adverse impacts of higher tariffs will be offset by stronger momentum in domestic demand than previously anticipated,” the World Bank said.

The institution upgraded its estimate for the current fiscal year by a sharp 0.9 percentage points to 7.2 percent, reflecting India’s strong performance in the first half of the year. Robust private consumption, aided by earlier tax reforms and improving real incomes—particularly in rural areas—has been a key driver of this upgrade.

“In India, growth is estimated to increase to 7.2 percent in FY2025–26, mainly reflecting robust domestic demand, including strong private consumption, supported by earlier tax reforms and improvements in real household earnings in rural areas,” the report noted.

First advance estimates released by the government last week pegged FY26 growth at 7.4 percent.

Looking ahead, the World Bank expects growth to moderate slightly. For FY27, it projects expansion of about 6.6 percent, marginally lower than its earlier estimate of 6.7 percent. The medium-term outlook, however, remains constructive, with services activity expected to stay strong alongside a gradual recovery in exports and a pickup in investment.

“Growth is set to inch up to 6.6 percent in FY2027–28, underpinned by robust services activity, as well as a recovery in exports and a pickup in investment,” the report said.

Globally, growth is expected to remain subdued. The World Bank forecasts world output to slow to 2.6 percent in 2026 from 2.7 percent in 2025. Emerging market and developing economies are projected to grow 4 percent, down from 4.2 percent, while advanced economies are expected to see growth ease to 1.6 percent.

Among major economies, the US is expected to grow slightly faster at 2.2 percent, up from an earlier estimate of 2.1 percent, while China’s growth is projected to slow to 4.4 percent from 4.9 percent.