World Bank raises India's growth projection to 6.5 pc for 2025-26

The World Bank on Tuesday raised India’s growth forecast for the current fiscal to 6.5 per cent, up from 6.3 per cent estimated earlier, and said the country is expected to remain the fastest-growing major economy, underpinned by continued strength in consumption growth.

US Tariffs Pose Challenge Ahead

The World Bank also cautioned that 50 per cent tariffs on Indian shipments imposed by the US will have implications for the economy in the coming year.

It has lowered the GDP growth forecast for 2026-27 to 6.3 per cent, down from 6.5 per cent projected earlier.

Strong Domestic Conditions Support Growth

"India is expected to remain the world’s fastest-growing major economy, underpinned by continued strength in consumption growth," said the World Bank's South Asia Development Update (October 2025).

Domestic conditions, particularly agricultural output and rural wage growth, have been better than expected. The government’s GST reforms reducing the number of tax brackets and simplifying compliance are also expected to boost economic activity.

Growth Outlook Impacted by US Tariffs

"The forecast for FY26/27 has been downgraded...as a result of the imposition of a 50 per cent tariff on about three-quarters of India’s goods exports to the United States," the report noted.

Regional Outlook: South Asia Growth to Slow

The report further said growth in South Asia is expected to slow sharply from 6.6 per cent in 2025 to 5.8 per cent in 2026.

Despite this deceleration, growth will remain stronger than other emerging market and developing economies (EMDEs).

Inflation is expected to continue within or trend toward central bank targets, the World Bank added.

PTI Inputs