World Bank retains India’s growth forecast at 6.3% for FY26

Indian economy to retain its fastest growing economy tag

Indian economy would continue to grow a tad slower at 6.3 percent in FY26 compared with 6.5 percent in the previous year, World Bank said on June 10, retaining India’s growth outlook from April forecast.

The multilateral institution was more optimistic about the coming year, as it projected the economy to grow 6.5 percent in FY26 and 6.7 percent in FY27 on the back of robust services activity leading to higher exports.

The June outlook still stands lower than January estimates, however, the World Bank highlighted that India despite the slip will continue to retain the fastest growing major economy tag.

“The forecast for growth in FY2025/26 has been downgraded by 0.4 percentage point relative to January projections, with exports dampened by weaker activity in key trading partners and rising global trade barriers,” said the multilateral report in its report.

The Reserve Bank of India retained its growth outlook at 6.5 percent for FY26 in its meeting last week.

On the inflation front, the World Bank noted that inflation is likely to stay contained.

RBI has been more optimistic on the inflation front, as it lowered the inflation forecast for the year to 3.7 percent from 4 percent projected earlier.

India’s inflation had declined to a five year low of 3.2 percent in April.

On the fiscal front, the World Bank’s outlook was also optimistic.

“Fiscal consolidation is expected to continue in India over the forecast horizon, with growing tax
revenues and declining current expenditures projected to contribute to a gradual decline in the
public debt-to-GDP ratio,” it said.

The global scenario looks more difficult, as growth is expected to drop 0.5 percentage points to 2.3 percent, owing to trade tensions and policy uncertainty, with average decadal growth since 2020 dipping to lowest level since 1960s.

“Outside of Asia, the developing world is becoming a development-free zone," said Indermit Gill, chief economist, World Bank.

In 2025, growth is expected to slow in 60 percent of the world's developing economies.