World Bank cuts India’s growth forecast to 6.3% for FY26

World Bank predicts Indian economy to grow slower in Fy26

Indian economy will grow at 6.3 percent in FY26, 0.4 percentage point lower compared with October forecast, as increasing uncertainty makes global environment more challenging, World Bank said on April 23.

India’s growth is also expected to slow down from the previous fiscal growth of 6.5 percent, the World Bank noted as it pointed out that fiscal measures will help keep the economy on path.

“The benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty. Private consumption is expected to benefit from tax cuts, and the improving implementation of public investment plans should boost government investment, but export demand will be constrained by shifts in trade policy and slowing global growth,” it said.

Finance minister Nirmala Sitharaman in her recent Budget announced tax exemptions for individuals earning up to Rs 12 lakh and rationalised tax slabs for higher income groups.

The World Bank forecast is a tad higher than the International Monetary Fund, which, on Tuesday, projected Indian economy to grow 6.2 percent in FY26, followed by 6.3 percent growth in FY27 owing to trade uncertainty.

However, the multilateral institutions seem to be less optimistic than Reserve Bank which expects the economy to grow 6.5 percent in the current fiscal.

Economists expect that recent rate cuts by the Reserve Bank are also expected to give a boost to the economy, with the central bank having delivered two rate cuts of 25 bps each till now. The policy rate now stands at 6 percent.

The economy is also expected to get a boost from the 90-day pause in tariffs announced by US President Donald Trump on April 9, a week after he imposed differential reciprocal tariffs on 75 nations.

Preliminary data for April released on April 23 showed that private sector activity in India rose to an eight month high of 60 from 59.5 in the previous month.

The World Bank noted that the entire region faced downside risk with growth expected to slow to 5.8 percent, especially with a decade of shocks eroding the ability of region to cushion against new ones.

“As growth prospects dim, the challenge grows to create jobs for South Asia’s rapidly expanding working-age population. South Asia’s large diasporas could become a source of strength if their knowledge, networks, and other resources can be better tapped for investment and trade,” it noted