Daijiworld Media Network - Washington

Washington, Jan 14: India’s economic growth is projected to moderate to 6.5 per cent in the fiscal year 2026–27, yet the country will continue to be the fastest-growing among the world’s largest economies, the World Bank Group said in its Global Economic Prospects report released on Tuesday.

The forecast assumes that the 50 per cent import tariffs imposed by the United States remain in force during the period. Despite higher US tariffs on certain Indian goods, the World Bank has retained India’s growth projection unchanged from its June estimates.

According to the report, the negative impact of tariffs is likely to be offset by strong domestic demand and exports turning out to be more resilient than previously anticipated. Growth is expected to edge up to 6.6 per cent in FY2027–28, supported by robust activity in the services sector, a recovery in exports and a pick-up in investment.

The World Bank estimated that India’s growth strengthened to 7.2 per cent in FY2025–26, driven by resilient domestic demand. Separately, the Indian government has projected the economy to grow by 7.4 per cent in real terms in FY26, accelerating from 6.5 per cent in FY25.

Inflation is expected to converge towards the Reserve Bank of India’s target in FY2026–27, assuming normal seasonal conditions help contain food price pressures. Fiscal consolidation is also expected to continue, with a decline in current spending outweighing the impact of tax cuts, resulting in a gradual reduction in the public debt-to-GDP ratio, the report said.

The World Bank noted that growth in South Asia strengthened to an estimated 7.1 per cent in 2025, largely due to India’s resilient performance, which helped cushion the region against rising global trade tensions and heightened policy uncertainty.

However, South Asia’s growth is projected to slow to 6.2 per cent in 2026, mainly due to the impact of increased US import tariffs on India’s export growth. The Bank downgraded its South Asia growth forecast for this year by 0.2 percentage point from June, citing higher-than-expected US tariffs and revised assumptions on the timing of their impact, now expected to spill over from 2025 into early to mid-2026.

Growth in the region is forecast to recover to 6.5 per cent in 2027 as domestic demand firms and exports rebound, aided by strong services activity and easing political uncertainty in several economies, the report added.