India’s Growth Story Gets a Plot Twist—World Bank Lowers the Bar for FY26

The World Bank has lowered India's GDP growth estimate for FY2025-26 to 6.3%, down from its previous estimate of 6.7%. This downward revision, as discussed in the most recent South Asia Development Update, is based on increasing global economic headwinds and ongoing domestic issues.

 

Main Points:

 

Growth Slowing: India's GDP is currently expected to rise by 6.3% in FY26, down from 6.5% in FY25, as global demand slows and policy uncertainties persist in the country.

 

Global Factors: The downgrading of the economy is attributed to slow world trade, persistent geopolitical tensions, and trade policy uncertainty in the US, all of which are meant to slow export growth.

 

Domestic Challenges: Private investment has also grown slower than anticipated, and sluggishness in public capital expenditure has added to the softer outlook, even after the government's attempts to increase domestic demand.

Even as the IMF and other organizations cut their forecasts too, India remains poised to continue as the world's fastest-growing major economy.

 

Focus on Policy: India is urged by the World Bank to shore up fiscal strength, enhance tax revenue collection, and prepare itself against future economic shocks.

Even though India's growth is enviable in the rest of the world, there lies ahead the challenge of prudential policy and flexibility.

 

Sources: Times of India, Business Standard, Economic Times