THEBUSINESSBYTES
BUREAU
WASHINGTON,
JANUARY 13, 2026
India is set
to retain its position as one of the world’s fastest-growing major economies,
with the World Bank projecting robust growth of 7.2 per cent in FY2025-26,
underpinned by strong domestic demand even as global trade tensions intensify.
The outlook underscores India’s growing resilience at a time when much of the
global economy is grappling with uncertainty and slowing momentum.
In its latest Global Economic Prospects report, the
World Bank said India’s solid performance played a decisive role in lifting
overall growth across South Asia in 2025, effectively offsetting the drag from
heightened policy uncertainty and global trade frictions. Regional growth
strengthened to 7.1 per cent, driven “mainly because of resilient activity in
India,” the report noted.
The Bank
attributed India’s expansion largely to robust domestic demand, marked by
strong private consumption supported by earlier tax reforms and rising real
household earnings, particularly in rural areas. This internal strength, it
said, has helped cushion the economy from external shocks, including higher
tariffs on certain exports to the United States.
While growth
is expected to moderate to 6.5 per cent in FY2026-27 if higher US import
tariffs persist, the Bank projects a gradual recovery to 6.6 per cent in
FY2027-28, aided by strong services activity, a pickup in exports and improved
investment flows. Notably, the Bank kept India’s growth forecast unchanged from
earlier projections, stating that the adverse effects of higher tariffs are
likely to be offset by stronger-than-anticipated domestic demand.
India
continues to remain South Asia’s primary growth engine. Excluding India, growth
in the region is forecast to strengthen to 5.0 per cent in 2026 and 5.6 per
cent in 2027, while South Asia as a whole is expected to slow to 6.2 per cent
in 2026 before rebounding thereafter.
For developing
economies such as India, the report stressed the urgency of reforms to boost
productivity and job creation. With per capita income growth in developing
economies projected at just 3 per cent in 2026, well below long-term averages,
the Bank said sustained structural reforms will be critical to ensure long-term
growth and convergence with advanced economies.
