World Bank Maintains India's 6.3% GDP Growth Forecast Despite Global Economic Headwinds
The World Bank has retained India's GDP growth forecast at 6.3% for fiscal year 2025-26, affirming the country's position as the fastest-growing major economy globally. This decision comes amid a broader downward revision of growth projections for nearly 70% of world economies, highlighting India's resilience in an increasingly challenging global economic environment.
India Remains Fastest Growing Large Economy
Despite global uncertainties and trade tensions, India is projected to maintain its leadership position among the world's largest economies with a growth rate of 6.3% in FY2025-26. The World Bank's Global Economic Prospects report emphasizes that India will continue to outpace other major economies, even as global growth faces significant headwinds.
However, the forecast reflects some moderation from earlier projections. The World Bank had previously cut India's growth forecast by 40 basis points in April 2025 and has now maintained this revised projection, citing concerns about weakening exports due to reduced activity among key trading partners and rising global trade barriers.
Medium-Term Growth Projections
Looking ahead, the World Bank has adjusted its medium-term forecasts for India. The growth projection for FY2027 has been lowered by 20 basis points to 6.5%, while FY2028 is expected to see growth of 6.7%. The bank attributes the FY2028 improvement to robust services activity that is expected to contribute to a pickup in export performance.
Investment growth is anticipated to slow in the near term, primarily reflecting what the World Bank describes as "a surge in global policy uncertainty." This highlights the interconnected nature of global economic conditions and their impact on domestic investment decisions.
Global Economic Outlook Shows Significant Deterioration
The World Bank's report paints a concerning picture of global economic prospects, with 2025 global growth revised down to 2.3% from the previously forecasted 2.7%. This represents the slowest pace since 2008, excluding periods of outright global recession.
The projections for 2026 show only marginal improvement to 2.4% (down from 2.7% predicted in January), with 2027 expected to reach 2.6%. If these forecasts materialize, the average global growth in the first seven years of the 2020s would be the slowest of any decade since the 1960s.
Developing World Faces 'Development-Free Zone' Challenge
World Bank Chief Economist Indermit Gill highlighted a troubling trend for developing economies outside Asia, describing the situation as a "development-free zone." Growth in developing economies has consistently declined over three decades:
- 2000s: 6% annually
- 2010s: 5% annually
- 2020s: Less than 4% annually
This decline mirrors the trajectory of global trade growth, which has fallen from an average of 5% in the 2000s to less than 3% in the 2020s, while debt levels have climbed to record highs.
Recent Policy Developments Support Growth
The World Bank's retention of India's growth forecast comes following the Reserve Bank of India's aggressive monetary policy stance. The RBI recently announced a 50 basis point cut in the policy repo rate to 5.50%, bringing total rate cuts in 2025 to 100 basis points.
The RBI's Monetary Policy Committee emphasized the need to "stimulate domestic private consumption and investment through policy levers to step up the growth momentum." With headline retail inflation expected to average just 3.7% in FY26, the central bank has room for continued policy support.
Economic Performance and Fiscal Outlook
India's recent economic performance shows mixed signals. GDP growth declined to 6.5% in FY25 – the slowest pace in four years – from 9.2% the previous year. The World Bank attributes this moderation to a slowdown in industrial production, though this was partially offset by steady services activity and recovery in agricultural output.
Most economists outside the government and central bank project growth closer to 6% for the current year, while the Indian government has forecast growth in the range of 6.3-6.8% for the current fiscal.
Fiscal Consolidation and Debt Management
The World Bank expects India to continue its fiscal consolidation efforts, with growing tax revenues and declining current expenditures contributing to a gradual decline in the public debt-to-GDP ratio. The Indian government plans to target a debt-to-GDP ratio from the next fiscal year beginning April 2026.
The government aims to reduce this ratio to 50% by FY2031 (within a range of 49-51%), down from the estimated 56.1% in FY26 according to budget documents.
Trade Tensions and Policy Uncertainty
Global trade tensions continue to create uncertainty, with the Trump administration having enforced reciprocal tariffs before suspending them for 90 days while seeking favorable trade agreements. The World Bank suggests that resolving current trade disputes could provide significant upside to global growth projections.
According to the bank's analysis, if trade disputes were resolved with agreements that halve tariffs relative to late May levels, global growth would be 0.2 percentage points stronger on average over 2025 and 2026.
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