World Bank raises India's GDP growth projection to 7.2% for FY26

The projection is based on the assumption that the 50 % import tariffs by the US remain in place throughout the forecast horizon.

New Delhi: The World Bank has raised India's GDP growth forecast to 7.2 per cent for the current fiscal, up by 0.9 percentage points from its June projections, on the back of robust domestic demand and tax reforms.

In its flagship report "Global Economic Prospects", the World Bank also said growth in India is projected to slow to 6.5 per cent in 2026-27.

The projection is based on the assumption that the 50-per cent import tariffs by the US remain in place throughout the forecast horizon.

"Even so, India is expected to maintain the fastest growth rate among the world's largest economies," the report said.

The World Bank further said that despite higher tariffs on certain exports to the United States, the growth forecast has remained unchanged relative to June projections, primarily because the adverse impacts of those tariffs will be offset by stronger momentum in domestic demand and more resilient exports than previously anticipated.

The US accounts for about 12 per cent of India's merchandise exports.

"Growth is set to inch up to 6.6 per cent in FY2027/28, underpinned by robust services activity, as well as a recovery in exports and a pickup in investment," it added.

On the economic growth for the current year, the report said, "In India, growth is estimated to increase to 7.2 per cent in fiscal year (FY) 2025/26 (April 2025 to March 2026), as domestic demand has remained robust, reflecting strong private consumption, supported by earlier tax reforms and improvements in real household earnings in rural areas".

In June, the multilateral lending agency had estimated India's growth at 6.3 per cent.

According to the First Advance Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), the Indian economy is expected to grow by 7.4 per cent in the current fiscal.

On the rupee, the World Bank said India's currency has depreciated since May amid capital outflows driven by higher US tariffs and heightened trade-related uncertainty.

The report also said the global economy has shown notable resilience to heightened trade tensions and policy uncertainty.

Last year, stockpiling of traded goods, strong risk appetite, and a surge in artificial intelligence (AI) spending supported activity, while supply chains adapted to rising trade barriers, it said.

The faster-than-expected pace of growth capped a five-year global recovery from the 2020 recession unmatched in more than six decades, but this masks a sharp divergence, it said.