World Bank raises India's growth forecast, consumer spending expected to remain strong

On Tuesday, the World Bank raised India's growth forecast for the current fiscal year to 6.5 percent from 6.3 percent. The bank stated that continued strength in consumer spending is expected to make India the fastest-growing major economy. The World Bank cautioned, though, that the 50 percent tariff by the United States on Indian exports can affect the country's economy next year.

It reduced its 2026-27 GDP growth estimate from 6.7 percent to 6.5 percent. For the 2027-28 fiscal year, the World Bank has estimated growth at 6.3 percent. Domestic conditions, especially farm production and rural wage increases, have been stronger than anticipated, the World Bank reported. Government reforms to the Goods and Services Tax (GST), reducing the number of tax slabs and simplifying compliance, are expected to boost activity.

It stated that the forecast for fiscal year 2026-27 has been lowered as a result of the imposition of 50 percent tariffs on nearly three-quarters of India's goods exports to the US. The report further stated that growth in South Asia is expected to decline from 6.6 percent in 2025 to 5.8 percent in 2026.

Despite this slowdown, growth will remain stronger than in other emerging market and developing economies (EMDE) regions. It stated that inflation is expected to remain within or in line with the central bank's target.