World Bank Raises India’s FY27 GDP Growth Forecast to 7.1%

World Bank Raises India’s Growth Forecast to 7.1%

The World Bank has increased its GDP growth forecast for India for the current fiscal year by half a percentage point to 7.1%.

The revised projection reflects the strong expansion expected in the Indian economy and comes as the World Bank released its twice-yearly South Asia Economic Update on Tuesday.

The multilateral organisation also expects India's economic momentum to contribute significantly to overall growth across the South Asia region.

South Asia Growth Forecast Raised to 6.9%

According to the World Bank's latest economic update, the South Asia region is expected to record GDP growth of 6.9% in 2026.

This is higher than the organisation's previous forecast of 6.3%.

The increase in the regional growth outlook is largely linked to India's stronger expected economic performance.

However, the growth picture changes significantly when India is excluded from the regional calculation.

Growth Excluding India Revised Down

The World Bank has projected growth for South Asia excluding India at 3.6%.

This represents a downward revision from its earlier estimate of 4.1%.

The revision is attributed largely to a significant downward adjustment in the growth outlook for Bangladesh.

Therefore, while the overall South Asian growth forecast has been increased, the economic performance of the region's other economies remains more subdued when India is excluded.

Strong Momentum in Industry and Services

The World Bank expects India's strong momentum in industry and services to continue.

The organisation's assessment points to continued economic expansion supported by activity across these sectors.

The report also highlighted several reforms undertaken in India that are expected to contribute to the country's economic performance.

These include consolidation of labour codes, Goods and Services Tax (GST) reforms, rationalisation of tariffs, and the bankruptcy and insolvency framework.

Reforms Highlighted by World Bank

The World Bank pointed to a number of reforms while assessing India's economic outlook.

Among the measures highlighted were the consolidation of labour codes, reforms related to GST, tariff rationalisation and the bankruptcy and insolvency framework.

According to the report, these reforms form part of the policy environment supporting India's continued economic expansion.

The World Bank expects the momentum in industry and services to remain strong, contributing to the country's projected growth.

AI Adoption and Employment Challenges

Alongside its positive growth forecast, the World Bank has also highlighted challenges facing South Asia from artificial intelligence and demographic changes.

The organisation has called for faster job creation as economies in the region respond to changing technology and labour-market conditions.

The World Bank's concerns extend beyond economic growth figures, focusing on whether the region can generate enough employment opportunities and strengthen the skills of its workforce.

The report also highlighted the need to prepare for demographic changes before ageing pressures become more significant.

India’s AI Adoption Index

The report also discusses artificial intelligence adoption.

According to the World Bank's “AI Adoption Index”, India's figure stands at 0.27.

The index considers factors including purchases of AI software by firms, the number of uses of advanced AI technologies and the core business functions in which AI is being used.

The figure provides an indication of AI adoption in India's business environment as considered by the World Bank's index.

Need for Stronger Workforce Skills

The World Bank has stressed the importance of strengthening workforce skills as South Asian economies adapt to technological changes.

The organisation has called for greater attention to skills development alongside efforts to expand employment.

This is particularly relevant as artificial intelligence changes the nature of work and the skills required across different sectors.

The World Bank's assessment therefore combines a positive outlook for economic growth with warnings about the longer-term challenges that could affect the region's workforce.

Demographic Pressures and Social Support

Demographic change is another major issue highlighted by the World Bank.

The organisation has called for countries in South Asia to build old-age income support and health systems before ageing pressures reach their peak.

The recommendation reflects the need for governments to prepare social and healthcare systems in advance as demographic conditions change.

The World Bank's latest outlook therefore presents two sides of South Asia's economic situation: strong near-term growth, particularly because of India's performance, and the need to address employment, technology, skills and demographic pressures.

India Remains a Major Driver of Regional Growth

The revised 7.1% forecast places India at the centre of the World Bank's improved outlook for South Asia.

While the overall regional growth forecast has increased to 6.9%, growth excluding India has been revised down to 3.6%.

The World Bank's assessment indicates that India's strong economic expansion is an important factor behind the region's overall growth outlook.

At the same time, the report underlines the need for India and other South Asian economies to address challenges surrounding AI adoption, employment, workforce skills and demographic changes.

The latest forecast therefore combines a stronger near-term growth projection for India with a warning that economic expansion needs to be accompanied by preparation for technological and demographic shifts.