India’s economic growth forecast for FY2025-26 has been sharply lowered to 6.3% from 6.7%, a 40 basis point cut by the World Bank in its latest economic outlook. The forecast for FY2026-27 has also been trimmed by 20 basis points to 6.5%, signaling growing concerns about the country’s ability to maintain high growth amid mounting global uncertainties.
While India remains one of the fastest-growing major economies, the World Bank’s downward revision reflects a more cautious stance as the global environment turns increasingly unpredictable. From geopolitical tensions and supply chain disruptions to tightening global financial conditions, the report highlights a convergence of risks that are expected to weigh on India’s economic momentum over the next two years.
The forecast for FY2027-28 remains more optimistic at 6.7%, indicating expectations of a gradual economic recovery as global conditions stabilize and domestic reforms take hold.
What the World Bank Said in Its Report
The World Bank’s Global Economic Prospects report highlighted that India’s public debt-to-GDP ratio is expected to decline gradually due to growing tax revenues and falling current expenditures, contributing to fiscal consolidation. It noted that India’s import demand would bolster trade within the South Asia region.
The report also urged developing economies to liberalise further by forging strategic trade and investment partnerships and diversifying trade, especially through regional agreements.
On a broader scale, the World Bank projected global growth at 2.3% in 2025—marking the weakest performance in 17 years outside of global recessions. However, it added that growth could rebound more quickly if major economies succeed in easing trade tensions, thereby reducing policy uncertainty and financial volatility.
Global Pressures, Local Challenges
India’s downgraded outlook comes against the backdrop of continued global strain. The war in Eastern Europe, instability in the Middle East, and persistently high interest rates in advanced economies have combined to depress global trade and investment. These external shocks have had knock-on effects for emerging markets, including India, where growth has so far been buoyed by strong public investment and a resilient services sector.
Domestically, high borrowing costs and subdued private consumption have contributed to a more restrained growth environment. While India has shown notable resilience in recent years, the World Bank cautions that its medium-term prospects now hinge on policy responsiveness and the strength of its structural reforms.
