New Delhi: The World Bank has raised India’s economic growth forecast for 2026–27 to 6.6%, up from its earlier estimate of 6.3%, reinforcing the country’s position as the key growth engine of South Asia despite global uncertainties.
The upward revision reflects confidence in India’s domestic demand strength, even as geopolitical tensions and volatile energy markets continue to cloud the broader global outlook.
India remains South Asia’s growth anchor
According to the World Bank’s latest South Asia Economic Update, India is expected to remain the strongest pillar of the regional economy, offering stability at a time when neighbouring countries face slower growth.
While South Asia’s overall growth is projected to ease to 6.3% in 2026, down from 7.0% in 2025, India continues to outperform the region.
The Indian economy is forecast to grow:
- 7.6% in 2025–26
- 6.6% in 2026–27
This resilience is largely driven by strong domestic consumption, which is helping cushion the impact of global headwinds.
Global risks continue to weigh
Despite the positive revision, the World Bank has flagged several risks that could affect the region’s growth trajectory.
Key concerns include:
- Ongoing geopolitical tensions, particularly in the Middle East
- Volatility in global crude oil prices
- Inflationary pressures
- Weakening remittance flows
South Asia’s heavy dependence on imported energy makes it particularly vulnerable to oil price shocks, which can quickly translate into higher inflation and tighter monetary policies.
Ajay Banga flags global slowdown concerns
Ajay Banga, President of the World Bank, warned that geopolitical conflicts are likely to slow global growth and keep inflation elevated, regardless of how quickly they are resolved.
These global pressures are expected to spill over into emerging markets, including South Asia, adding to existing economic challenges.
The report also highlights structural risks such as:
- Climate-related disruptions
- Financial instability
- Slower recovery in global trade
Mixed outlook across South Asia
While India continues to lead, the economic outlook for other South Asian countries remains uneven:
- Bangladesh: Expected to grow 3.9% in 2025–26 amid recovery from political unrest
- Bhutan: Projected growth of 7.1%, supported by hydropower projects
- Sri Lanka: Likely to slow to 3.6% in 2026 due to rising energy costs
- Maldives: Growth may drop sharply to 0.7% amid tourism and financing pressures
- Nepal: Forecast to grow 2.3%, with gradual improvement ahead
This divergence underscores India’s outsized role in sustaining regional growth momentum.
Industrial policy impact remains mixed
The report notes that South Asian economies, including India, have accelerated industrial policy measures in recent years.
However, outcomes have been mixed:
- Import restrictions have reduced inflows
- Export growth has not seen significant gains
This suggests that while policy efforts are intensifying, translating them into sustained economic expansion remains a challenge.
Conclusion
The World Bank’s upward revision of India’s growth forecast to 6.6% underscores the country’s resilience in a volatile global environment. While risks remain, India’s strong domestic demand and economic fundamentals continue to position it as the backbone of South Asia’s growth story.