India to remain fastest-growing major economy in FY27: World Bank
What's the story
India is set to remain the world's fastest-growing major economy, with a growth rate of 6.6% in the fiscal year 2026-27, a sharp decline from last year's 7.7%, according to a World Bank report. The projected slowdown is mainly due to a dip in private demand growth amid rising energy prices and other input costs.
Future projections
GST reduction can boost consumer demand: World Bank
The World Bank report also noted that a reduction in Goods and Services Tax (GST) rates could help boost consumer demand. It further predicted an economic recovery with a projected growth rate of 7.2% for fiscal year 2027-28. Despite the uncertainty arising from geopolitical conflicts, India's economic activity remained strong earlier this year, backed by resilient domestic demand.
Economic resilience
Report highlights strong private consumption
The World Bank report highlighted strong private consumption, especially in rural areas, with urban demand also showing signs of recovery. Tax collections from domestic sales have been steadily rising. To ease price pressures from high energy costs and agricultural product shortages (especially fertilizers), India has taken several measures including cutting fuel taxes.
Export impact
Free trade agreements may soften external demand blow
The World Bank report also said that reduced US tariffs and the expected implementation of free trade agreements could soften the blow of weaker external demand due to geopolitical conflicts, especially on merchandise exports. It further predicted a growth rebound over the next two fiscal years, driven by strengthening domestic demand and an uptick in export growth.
Regional growth
Per capita growth in EMDEs to slow in 2026
The World Bank report projected that per capita growth in Emerging Markets and Developing Economies (EMDEs) will slow to its weakest since the pandemic in 2026. This is due to geopolitical conflicts and persistent disruptions affecting EMDEs differently. In the South Asia region, growth is expected to soften to 6.3% in 2026, mainly due to the impact of Middle East conflicts such as rising energy prices, reduced oil and gas supplies, and disruptions in remittances/tourism.