India's Economic Growth Forecast by the World Bank
The World Bank has maintained its growth forecast for India at 6.7% for FY26, citing India as the fastest-growing major economy over the next two years.
Sectoral Growth Outlook
- Services Sector: Expected to experience sustained expansion.
- Manufacturing Activity: Anticipated to strengthen due to government efforts to enhance logistics and improve the business environment through tax reforms.
Global Economic Projection
- Global economy is projected to grow at 2.7% in 2025 and 2026, consistent with 2024 levels.
- Developing economies are expected to maintain a growth rate of about 4% over the next two years.
Challenges for Developing Economies
Indermit Gill, World Bank’s Chief Economist, highlighted the challenges ahead for developing economies:
- High debt, weak investment, and productivity growth.
- Rising costs of climate change.
- Need for domestic reforms to boost private investment, enhance trade relations, and optimize use of capital, talent, and energy.
India's Economic Indicators
- Private Consumption Growth: Expected to be fueled by a robust labor market, expanding credit, and declining inflation.
- Government Consumption Growth: May remain limited.
- Investment Growth: Projected to be steady with rising private investments.
Growth and Economic Challenges
India’s growth is projected to slow to 6.5% in 2024-25 from 8.2% in 2023-24 due to weaker investment and manufacturing growth. However, services and agriculture sectors show resilience.
Fiscal Policies in South Asia
- Fiscal policies are expected to be tight across South Asian countries.
- In India, fiscal deficits are likely to shrink due to increasing tax revenues.
Risks and Challenges in the South Asian Region
- Policy Uncertainty: Adverse trade policy shifts in major economies pose risks.
- Protectionist Measures: Intensification could affect exports and growth.
- Commodity Prices: Higher prices could harm growth, given the region's dependence on imports.
- Other Risks: Social unrest, tighter monetary policies, climate change disasters, and weaker growth in major economies.
