In a significant economic update, the World Bank announced on Tuesday, October 7, 2025, that it has upgraded India’s growth projection for the current fiscal year. The forecast now stands at 6.5%, a notable increase from the earlier estimate of 6.3%. This revised outlook positions India to maintain its status as the world’s fastest-growing major economy, primarily driven by sustained strong consumption growth.
However, the World Bank also sounded a note of caution regarding potential headwinds. The report specifically highlighted the implications of a substantial 50% tariff recently imposed by the United States on approximately three-quarters of Indian shipments, which is expected to affect the country in the upcoming year.
While the immediate forecast is positive, the GDP growth projection for 2026-27 has been slightly lowered to 6.3% from the previous 6.5%. This adjustment is a direct consequence of the aforementioned U.S. tariffs.
The World Bank’s latest “South Asia Development Update (October 2025)” reiterates that “India is expected to remain the world’s fastest-growing major economy, underpinned by continued strength in consumption growth.”
Factors contributing to this optimistic outlook include improved domestic conditions, particularly a robust agricultural output and healthy rural wage growth. Furthermore, the Indian government’s ongoing reforms to the Goods and Services Tax (GST), which involve streamlining tax brackets and simplifying compliance procedures, are anticipated to further bolster economic activity.
The report also indicates a broader regional trend: growth across South Asia is projected to experience a sharp slowdown, moving from 6.6% in 2025 to 5.8% in 2026. Despite this deceleration, the region’s growth is expected to remain more robust compared to other emerging market and developing economies (EMDEs).
Looking ahead, inflation in India is generally expected to either remain within the central bank’s target range or trend towards it, suggesting a stable monetary environment.