The World Bank delivered an optimistic update on Tuesday, revising India’s growth projection for the current fiscal year (2025-26) upwards to a strong 6.5% from its previous estimate of 6.3%. This projection solidifies India’s position as the world’s fastest-growing major economy, primarily fueled by robust domestic consumption.
However, the report didn’t come without a note of caution. The World Bank highlighted that new 50% tariffs on Indian shipments, recently imposed by the United States, are expected to have significant implications for the country in the upcoming year.
Interestingly, while the immediate outlook is bright, the GDP growth forecast for 2026-27 was slightly adjusted downwards to 6.3% from an earlier 6.5%, reflecting these external challenges.
The bank’s “South Asia Development Update (October 2025)” reiterated that India’s economic momentum is largely underpinned by the sustained strength in its consumption growth. This domestic demand has been further supported by more favorable conditions than anticipated, particularly in agricultural output and the growth of rural wages.
Moreover, the Indian government’s ongoing reforms to the Goods and Services Tax (GST) system, including efforts to reduce tax brackets and simplify compliance procedures, are anticipated to further bolster economic activity.
Looking at the broader region, the World Bank predicts a noticeable slowdown in South Asia’s overall growth, with a sharp deceleration from 6.6% in 2025 to 5.8% in 2026. Despite this regional trend, India is expected to maintain a stronger growth trajectory compared to other emerging market and developing economies (EMDEs).
On the inflation front, the report anticipates that prices will either remain within central bank targets or continue to trend towards them, offering a stable macroeconomic environment.