World Bank Keeps India's FY26 Growth Forecast At 6.3%

Looking further ahead, the World Bank expresses greater optimism, forecasting a 6.5 per cent growth rate for FY27 and an even stronger 6.7 per cent for FY28

India's economic growth is projected to maintain a robust pace, with the World Bank reaffirming its forecast for the current fiscal year, pegging it at 6.3 per cent for FY26. This projection, released on June 10, aligns with the multilateral institution's April estimates, indicating a slightly moderated, but still significant, expansion compared to the 6.5 per cent anticipated for the preceding year. 

Looking further ahead, the World Bank expresses greater optimism, forecasting a 6.5 per cent growth rate for FY27 and an even stronger 6.7 per cent for FY28. This positive outlook for the coming years is largely attributed to a vigorous services sector, which is expected to underpin higher export volumes.

Despite these encouraging figures, the World Bank’s latest June outlook for India's growth remains marginally lower than its January projections. However, the institution underscored that India is set to retain its status as the world's fastest-growing major economy, even with this slight recalibration. The report elaborated on the reasons for the adjustment: “The forecast for growth in FY2025/26 has been downgraded by 0.4 percentage point relative to January projections, with exports dampened by weaker activity in key trading partners and rising global trade barriers,” the multilateral report stated, pointing to external factors influencing India's export performance. This assessment aligns with the Reserve Bank of India's (RBI) recent decision to hold its growth outlook steady at 6.5 percent for FY26 during its latest monetary policy meeting.

Inflationary Pressures Expected To Remain Contained

On the crucial front of inflation, the World Bank's analysis indicates a favorable scenario for India, anticipating that price increases will largely remain in check. This view largely converges with the RBI's more sanguine stance. The Indian central bank, demonstrating increased confidence in its inflation management, recently revised its inflation forecast for the current year downwards to 3.7 per cent from an earlier projection of 4 per cent. This optimism is bolstered by recent data, which showed India's inflation dipping to a five-year low of 3.2 per cent in April, signaling a period of disinflation.

Optimistic Fiscal Outlook And Global Challenges

The World Bank also presented a positive assessment of India's fiscal health and future trajectory. The institution anticipates continued fiscal consolidation across the forecast horizon. This positive outlook is underpinned by expectations of increasing tax revenues coupled with a projected decline in current expenditures. These combined factors are expected to contribute to a gradual reduction in India's public debt-to-GDP ratio, indicating a strengthening of government finances.

However, the global economic landscape painted by the World Bank is considerably more challenging. Worldwide growth is expected to decline by 0.5 percentage points to a subdued 2.3 per cent. This slowdown is primarily attributed to persistent trade tensions and ongoing policy uncertainties across various economies.