World Bank Raises India’s FY26 Growth Forecast to 6.5%

On 7th October 2025, the World Bank released its South Asia Economic Update, highlighting India’s robust growth prospects and regional trends, and projecting India to remain the world’s fastest-growing major economy in FY26.

Key Points

India’s Growth Outlook: India’s GDP is projected to expand at 6.5% in FY26, up from 6.3% projected in June, driven by strong domestic consumption, higher rural wages, and improved agricultural output.
Rural Recovery: Rising rural incomes and agricultural productivity are contributing significantly to India’s resilient domestic demand, supporting sustained economic expansion.
Tax Reform Impact: Recent tax reforms have positively influenced the economy, strengthening business sentiment and boosting private investment.
South Asia Overview: The region’s overall growth is expected at 6.6% in 2025, but is projected to slow to 5.8% in 2026 due to global economic uncertainties and regional challenges.
Country-Specific Trends: Bangladesh is expected to grow at 4.8%, Bhutan’s forecast downgraded to 7.3% due to hydropower delays, Maldives at 3.9%, Nepal at 2.1% amid unrest, and Sri Lanka upgraded to 3.5% due to strong tourism and service exports.
Downside Risks: Key risks include spillovers from the global slowdown, trade policy uncertainty, socio-political unrest, and labor market disruptions from emerging technologies like artificial intelligence (AI).
AI and Workforce Implications: While AI threatens job displacement in moderately educated young workers, particularly in business services and IT, it also presents substantial productivity gains and high-paying roles requiring AI skills.