“Growth in India is projected to moderate to 6.6 per cent in fiscal year 2026/27 (April 2026 to March 2027), reflecting a slowdown in private demand growth owing to higher energy prices and other input costs,” the World Bank said in its report on Global Economic Prospects.
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Reduction in Goods and Services Tax rates should somewhat support consumer demand, the report said, adding that the economy is expected to rebound to 7.2 per cent projected growth in fiscal 2027-28.
Despite heightened uncertainty related to the conflict, economic activity in India remained robust early this year, supported by resilient domestic demand, the World Bank report said.
It said private consumption, particularly in rural areas, has been strong, with urban demand recovering.
Collections of taxes from domestic sales have also increased steadily, the report said, adding that to mitigate the price pressures arising from higher energy costs, as well as shortages of agricultural products, especially fertilizers, several measures have been implemented in India, including a reduction in fuel taxes.”Reduced US tariffs and the expected implementation of free trade agreements will likely mitigate the impact of weaker external demand due to the conflict, particularly on merchandise exports,” it said.
“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.
In per capita terms, growth in Emerging Markets and Developing Economies (EMDEs) in 2026 is projected to slow to its weakest pace since the pandemic, with the conflict and lingering disruptions impacting EMDEs to varying degrees.
In EMDEs, excluding China and India, subdued per capita income growth is expected to lead to nearly a decade of lost income convergence with advanced economies by 2028.
Growth in the South Asia Region is expected to soften to 6.3 per cent in 2026, mainly reflecting the adverse impact of the conflict in the Middle East, including higher energy prices, reduced supplies of oil and natural gas, and disruptions to remittances and tourism.