World Bank raises India's FY27 growth forecast to 7.1%
What's the story
The World Bank has revised its growth forecast for India's economy in FY27, predicting a 7.1% expansion. This is 50 basis points higher than its previous estimate of 6.6%. The revision comes as strong industrial and services activity offset weakness in agriculture, according to the bank's South Asia Economic Update for the month of October.
Regional impact
India to drive South Asia's growth
The World Bank has projected a 7.2% growth for India in FY28, up from its earlier FY27 estimate of 6.6%.
The bank also highlighted that India's economic performance will greatly influence the region's overall growth.
South Asia is expected to grow at 6.9% in 2026 and 6.7% in 2027, but without India, this number drops significantly to just 3.6% and 3.8%, respectively.
Tech gap
AI adoption lagging in India
The report also highlighted a major gap in artificial intelligence (AI) adoption between India and the US.
Only 23.4% of Indian firms use some form of AI, compared to 42.7% in America.
The World Bank's AI Adoption Index showed India scoring only 0.27 against a much higher score of 0.85 for the US, indicating that while Indian companies are catching up quickly, there's still a long way to go before they reach parity with their American counterparts.
Growth drivers
Infrastructure key to boosting AI use
The World Bank report also found that Indian companies see infrastructure and education as key factors that could speed up their use of AI.
About 72% of them said better digital infrastructure would boost their adoption of this technology, while 55% pointed to improvements in tertiary education.
However, expectations about productivity gains from faster development remain uneven among these firms.
Trade potential
Generative AI may not hurt South Asian firms
The World Bank report also challenges fears that generative AI will primarily lead advanced-economy firms to bring outsourced work back home.
It found global value-chain links between US customers and South Asian suppliers have grown fastest in sectors where both sides are highly exposed to AI.
This suggests that despite the risk of automation in routine business-process outsourcing tasks, there could be new higher-value work opportunities adjacent to services already performed by South Asian firms through advanced technology adoption.
Agricultural impact
Agriculture biggest risk to India's growth outlook
The World Bank report flagged agriculture as the biggest near-term risk to India's growth outlook.
It said India witnessed its fourth-driest June-August period since 1960, which could weaken agricultural output and rural demand while adding to food inflation.
This comes even as stronger activity elsewhere in the economy cushions overall growth.