World Bank retains India FY27 GDP growth forecast of 6.5%

Despite the upward revisions to the forecasts, the World Bank said the current decade is on track to be the weakest for global growth since the 1960s. (Reuters Image/File)

The World Bank on Tuesday retained its GDP growth forecast for India at 6.5 per cent for 2026-27, predicting a marked slowdown from its estimate of 7.2 per cent for the current fiscal ending in March on the assumption that the US’ 50 per cent tariffs stay in place.

“Growth in India is projected to slow to 6.5 per cent in FY26/27, assuming that the 50 per cent import tariffs by the United States remain in place throughout the forecast horizon,” the World Bank said in its Global Economic Prospects report. “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 higher tariffs will be offset by stronger momentum in domestic demand than previously anticipated,” it added.

The World Bank expects GDP growth to rise marginally to 6.6 per cent in 2027-28 — 10 basis points (bps) lower than the previous forecast of 6.7 per cent — on the back of “robust” services activity, a recovery in exports and a pickup in investments. It sees growth in 2025-26 at 7.2 per cent — lower than the Indian Statistics Ministry’s first advance estimate of 7.4 per cent — mainly due to robust domestic demand, including strong private consumption, supported by tax reforms and improvements in real household earnings in rural areas.

The World Bank’s numbers come after the United Nations last week upgraded its growth forecast for India for the 2026 calendar year by 20 bps to 6.6 per cent, with growth seen picking up pace slightly in 2027 to 6.7 per cent.

However, these projections — including the Statistics Ministry’s first advance estimate of 7.4 per cent for the current fiscal — do not take into account the significant changes being undertaken to update and revise India’s GDP data. The first growth print under the new series, which will see the base year being updated to 2022-23 from 2011-12 and incorporate several methodological changes including new sources of data, will be made public by the Ministry of Statistics and Programme Implementation (MoSPI) on February 27 when it will announce the GDP estimate for October-December 2025 and the second advance estimate for 2025-26. As such, forecasts by various agencies will likely have to be revised once the new series is available.

Updating the base year and improving data coverage and methodologies are crucial to presenting the correct picture of the economy which changed over the years.

Commenting further on the Indian economy, the World Bank said on Tuesday that fiscal consolidation is expected to continue, with the impact of tax cuts outweighed by a decline in current spending, “resulting in a gradual reduction in the public debt-to-GDP ratio”.

This year, the Indian government cut personal income tax as well as Goods and Services Tax (GST). Meanwhile, the Finance Ministry is also set to move to a new fiscal consolidation framework that will see it target a reduction in its debt-to-GDP ratio to 50 per cent by March 2031 from 57.1 per cent in 2024-25. Until now, the Centre has targeted the fiscal deficit. Economists expect it to achieve this year’s fiscal deficit target of 4.4 per cent of GDP.

Global economy’s resilience Even as it retained its expectations for India, the World Bank upgraded its forecast for global growth for 2025, 2026, and 2027 by 40 bps, 20 bps, and 10 bps, respectively, from the projections it had made in June 2025. The bank now sees global growth at 2.7 per cent in 2025, 2.6 per cent in 2026, and 2.7 per cent in 2027, with the world economy “proving more resilient than anticipated” even in the face of persistent trade tensions and policy uncertainty.

“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets. Over the coming years, the world economy is set to grow slower than it did in the troubled 1990s — while carrying record levels of public and private debt. To avert stagnation and joblessness, governments in emerging and advanced economies must aggressively liberalise private investment and trade, rein in public consumption, and invest in new technologies and education.”