The World Bank has decided to keep its economic growth projection for India unchanged. In its latest Global Economic Prospects report released on Tuesday, the institution maintained the forecast for India's GDP expansion at 6.5 percent for the fiscal year 2026-27.
Domestic Demand Offsets Trade Challenges
This prediction represents a noticeable deceleration from the estimated 7.2 percent growth for the current fiscal year ending in March 2026. The Bank's assessment assumes that the United States will maintain its 50 percent import tariffs throughout the forecast period.
"Growth in India is projected to slow to 6.5 percent in FY26/27, assuming that the 50 percent import tariffs by the United States remain in place throughout the forecast horizon," stated the World Bank in its official report.
Despite these trade barriers affecting certain exports to the American market, the growth forecast has not changed from the June projections. The Bank explained that stronger momentum in domestic demand than previously anticipated will counterbalance the negative impacts of higher tariffs.
Gradual Improvement in Following Years
The World Bank expects India's economic growth to rise slightly to 6.6 percent in 2027-28. This represents a minor downward revision of 10 basis points from the previous forecast of 6.7 percent. The Bank attributes this projected improvement to robust services activity, a recovery in exports, and increased investments.
For the 2025-26 fiscal year, the World Bank sees growth at 7.2 percent. This figure falls below the Indian Statistics Ministry's first advance estimate of 7.4 percent. The Bank credits strong domestic demand, including vigorous private consumption, for this performance. Tax reforms and improvements in real household earnings in rural areas have supported this demand.
Fiscal Consolidation Continues
The World Bank noted that India's government continues to improve its financial position. The impact of recent tax cuts has been outweighed by a decline in current spending. This combination should result in a gradual reduction in the public debt-to-GDP ratio.
This year, the Indian government implemented cuts to personal income tax and the Goods and Services Tax (GST). Simultaneously, the Finance Ministry plans to adopt a new fiscal consolidation framework. This approach will target reducing the debt-to-GDP ratio to 50 percent by March 2031, down from 57.1 percent in 2024-25.
Previously, the central government focused on fiscal deficit targets. Economists anticipate the government will achieve this year's fiscal deficit target of 4.4 percent of GDP.
Upcoming Data Revisions
Current projections from various agencies, including the Statistics Ministry's 7.4 percent estimate for the current fiscal year, do not account for significant changes underway in India's GDP data methodology. The Ministry of Statistics and Programme Implementation (MoSPI) will release the first growth figures under a new series on February 27, 2026.
This updated series will shift the base year to 2022-23 from 2011-12 and incorporate several methodological improvements, including new data sources. The release will include GDP estimates for October-December 2025 and the second advance estimate for 2025-26. Once this new data becomes available, forecasts from various agencies will likely require revision.
Updating the base year and enhancing data coverage and methodologies proves crucial for accurately representing an economy that has transformed significantly over the years.
Global Economic Context
The World Bank upgraded its global growth forecasts for 2025, 2026, and 2027 by 40, 20, and 10 basis points respectively from its June 2025 projections. The institution now anticipates global growth of 2.7 percent in 2025, 2.6 percent in 2026, and 2.7 percent in 2027.
The world economy has demonstrated more resilience than expected despite persistent trade tensions and policy uncertainty. However, the Bank cautioned that the current decade remains on track to experience the weakest global growth since the 1960s.
Indermit Gill, the World Bank Group's Chief Economist, commented on this situation. "With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty," Gill observed.
He warned that economic dynamism and resilience cannot diverge indefinitely without straining public finances and credit markets. The world economy is poised to grow slower in coming years than it did during the troubled 1990s, while carrying record levels of both public and private debt.
To prevent stagnation and rising unemployment, Gill urged governments in emerging and advanced economies to take decisive action. He recommended aggressively liberalizing private investment and trade, controlling public consumption, and investing in new technologies and education.
The World Bank's assessment follows a recent United Nations report that upgraded India's growth forecast for the 2026 calendar year by 20 basis points to 6.6 percent. The UN projected growth would accelerate slightly to 6.7 percent in 2027.
