World Bank Raises India's FY27 Growth Forecast to 6.6%

Synopsis

India's economic growth forecast for FY27 has been raised to 6.6 percent by the World Bank. This positive outlook is driven by reduced US tariffs and anticipated benefits from new free trade agreements. While external demand may weaken due to global conflicts, domestic demand and export growth are expected to pick up.

The World Bank expects trade agreements and ongoing structural reforms aimed at improving the business environment to bolster foreign direct investment inflows over 2027-28.

New Delhi: The World Bank raised India's FY27 growth forecast to 6.6% from 6.5% estimated in January, citing reduced US tariffs and the anticipated benefits of upcoming free trade agreements. These factors are expected to cushion the impact of weaker external demand stemming from the ongoing Middle East conflict.

Economic growth, however, is projected to moderate from 7.7% in FY26 as higher energy prices and rising input costs weigh on private demand. According to the latest Global Economic Prospects (GEP) report of the World Bank, reductions in Goods and Services Tax (GST) rates are likely to provide some support to consumer demand.

India is projected to remain among the world's fastest-growing economies.

Gross domestic product (GDP) growth is forecast to rise to 7.2% in FY28 and 7% in FY29.

"Growth is then anticipated to rebound over the next two fiscal years, driven by firming domestic demand and a pickup in export growth," the report said.

The World Bank expects trade agreements and ongoing structural reforms aimed at improving the business environment to bolster foreign direct investment inflows over 2027-28.

The closure of the Strait of Hormuz has significantly disrupted global energy markets.

Assuming the worst supply disruptions ease by July, the World Bank projects Brent crude oil prices to average $94 per barrel in 2026, about 36% higher than 2025 levels.

The report noted that to ease inflationary pressures arising from higher energy costs and shortages of agricultural inputs, particularly fertilizers, India has implemented several measures, including cuts in fuel taxes.