The World Bank on Tuesday upgraded India’s GDP growth forecast for FY27 to 7.1 per cent, a 50-basis-point hike from its April estimate of 6.6 per cent, saying growth has held up better than expected despite trade and geopolitical uncertainty. The revision, announced in the bank’s latest India Development Update, follows a stronger-than-anticipated 7.8 per cent GDP print in the April–June quarter.
The bank said growth accelerated to 7.8 per cent in FY26 from 7.2 per cent in FY25, driven by strong investment and solid private consumption, as a favourable policy and credit environment outweighed trade tensions. Rural consumption initially outpaced urban demand, supported by strong agricultural performance, rural income support, food subsidies and low inflation, while urban demand strengthened later in the year following income-tax relief and GST cuts. For FY28, the World Bank expects growth of 7.2 per cent.
Private consumption is expected to remain the main engine of growth in FY27, the bank said, while industry and services keep up their momentum. Exports have performed better than expected and are likely to provide the main upside to the outlook, according to the report, which added that strength in industry should offset a weaker agricultural outlook. Over the longer term, it pointed to the consolidation of labour codes, GST reforms, tariff rationalisation, Insolvency and Bankruptcy Code amendments and continued investment in physical and digital infrastructure as growth-supporting reforms.
At 7.1 per cent, the World Bank’s estimate now sits above the Reserve Bank of India’s own FY27 projection of 6.7 per cent. The upgrade follows a string of similar revisions by the Asian Development Bank, the OECD — which raised its forecast to 7.1 per cent as well — S&P, Moody’s and Fitch, all citing the robust June-quarter print and resilient domestic demand despite the West Asia conflict. For South Asia, the bank projected regional growth of 6.9 per cent in 2026 and 6.7 per cent in 2027 — but excluding India, the region manages just 3.6 and 3.8 per cent respectively, underlining how heavily the region’s outlook rests on India’s performance.
The report is not without warnings. A rainfall deficit through August is likely to weigh on rural demand, the bank said, while subdued government consumption stays muted and higher energy prices add pressure. “External risks are elevated,” the bank cautioned, citing downside risks from global oil prices, El Nino, stock-market corrections that could trigger capital-flow volatility, and the Middle East conflict. It also cautioned that growth in the second half of the fiscal is likely to slow from the first-quarter pace.
The update also offered a striking snapshot of India’s AI adoption: 23.4 per cent of formal firms use AI, compared with 42.7 per cent in the US, and only 3.5 per cent pay for AI software against 23.1 per cent in America. India is ranked 10th in AI readiness — behind the US, China and South Korea — but the bank said its large technical workforce, globally integrated IT sector and digital public infrastructure put it well placed to harness the technology, with better digital infrastructure and skills cited by firms as the key enablers.
For now, the bank expects medium-term growth to average 7.1 per cent between FY28 and FY29, with narrowing deficits and declining inflation. But much will hinge on the monsoon’s final tally, the trajectory of crude prices and whether private investment picks up as global uncertainty fades. The upgrade, in any case, is another vote of confidence in the India growth story — and, as the bank’s own numbers show, increasingly in the region’s too.
