The World Bank on Wednesday marginally raised India’s growth projections for the 2026-27 fiscal to 6.6% and said that although GST rate cuts would boost consumer demand in the initial months of the fiscal, headwinds from the West Asia crisis could dent growth.
The FY’27 projection compares with 6.9% estimated by the Reserve Bank of India (RBI), 6.1 per cent by the OECD and 6 per cent by Moody’s Ratings.
In its South Asia Economic Update report, the World Bank said India’s growth is estimated to have accelerated from 7.1 per cent in FY’25 to 7.6 per cent in FY’26 (April 2025 to March 2026), owing to strong domestic demand and export resilience.
Private consumption growth is particularly robust, supported by low inflation and rationalisation of the Goods and Services Tax (GST).
“Growth is projected to decelerate to 6.6% in FY27, reflecting headwinds from the Middle East conflict,” the World Bank said.
Although the reduction in GST rates should continue to support consumer demand in the first half of FY’27, elevated global energy prices are expected to put upward pressure on prices and constrain households’ disposable income, it added.
Government consumption growth is expected to soften due to the onset of higher subsidy outlays for cooking fuel and fertilisers. Investment growth is likely to moderate amid elevated uncertainty and rising input costs, the World Bank said.
Improved access to the United States and the European Union (EU) for India’s exports will be undermined by slower growth in major trading partners, it added.
The World Bank, in its Global Economic Prospects report in January, had projected India to grow at a rate of 6.5% in 2026-27.
The World Bank said the impact of the West Asia crisis is highly uncertain and other forecasters have revised down their growth projections to a range between 5.9% and 6.7% for FY’27.
On February 28, the US and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran.
Iran, the US and Israel agreed on a two-week ceasefire in the war that tore across the region and disrupted the global energy market.
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