World Bank Revises India's FY26 Growth Forecast Down to 6.3%

The World Bank has downgraded its growth projection for India for FY26 to 6.3%, which is 0.4 percentage points less than its estimate in October 2024. It attributes the downgrade to an "increasingly difficult global environment."

The World Bank, in its South Asia Development Update report, elaborated, "The advantages to private investment from easing of monetary stance and regulatory simplification are anticipated to be compensated by weakness in the global economy and policy uncertainty."

The report also observed that export demand would be constrained by shifts in trade policies and a slowdown in world growth. On the bright side, private consumption is likely to gain from recent tax reductions, while enhanced implementation of public investment projects is likely to increase government investment.

Martin Raiser, the World Bank’s Vice President for South Asia, stated, “Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment.” He emphasized that the region requires targeted reforms to address vulnerabilities, including fragile fiscal positions, underdeveloped agricultural sectors, and the consequences of climate-related shocks.

The World Bank also reduced South Asia's growth forecast for FY25, lowering it by 0.5 percentage points to 6.5%. According to the report, improving weak fiscal positions could be supported by strengthening domestic revenue mobilization to make the region more resilient to future economic shocks.

India's growth rate decelerated from 9.2% in FY24 to a projected 6.5% in FY25, the weakest growth rate in four years but still within the economy's long-term average. The World Bank again stated that India's export demand would be hampered by changing trade policies and global economic deceleration.

Similarly, in a release, the International Monetary Fund (IMF) on Tuesday cut its FY26 growth estimate for India by 30 basis points to 6.2%, attributing this to rising trade tensions and global uncertainties in its World Economic Outlook.