India’s economy is projected to grow at 6.3% in FY2025-26, retaining its status as the world’s fastest-growing major economy, according to the latest Global Economic Prospects report released by the World Bank on Tuesday. The projection remains unchanged from earlier forecasts, despite a 40-basis-point downgrade in April 2025 due to global uncertainties.
The report highlights India’s relative resilience amid a challenging global environment marked by weakening exports and slowing investment. “India is projected to maintain the fastest growth rate among the world’s largest economies,” the World Bank stated, though it acknowledged the revised forecast reflects subdued demand from key trade partners and increasing global trade barriers.
Investment Slows, But Services Stay Strong
The World Bank warned that investment growth in India could decelerate, largely due to rising policy uncertainty around the world. Despite this, the economy is expected to continue its upward trajectory, supported by a robust services sector that’s helping offset weaker industrial performance.
Looking further ahead, the World Bank slightly reduced its growth forecast for FY2026-27 by 20 basis points to 6.5%. For FY2027-28, GDP growth is projected to rebound to 6.7%, backed by stronger services and improving export activity.
Global Growth Losing Momentum
The global picture, however, is far less optimistic. The World Bank sharply cut its global growth forecast for 2025 to just 2.3%—the weakest pace since 2008 outside of recessions. That’s down from a 2.7% estimate made in January 2025. Growth in 2026 and 2027 is also expected to remain subdued, at 2.4% and 2.6% respectively.
“Outside of Asia, the developing world is becoming a development-free zone,” said Indermit Gill, the World Bank Group’s Chief Economist. He noted that growth in developing economies has slowed from 6% annually in the 2000s to under 4% in the 2020s, mirroring a broader decline in global trade and investment momentum.
Geopolitics and Trade Tensions Loom Large
The economic outlook has been clouded by rising geopolitical tensions and protectionist trade policies. Earlier this year, the U.S. imposed reciprocal tariffs on trade partners, only to suspend them temporarily in a bid to negotiate better trade terms. U.S. and Chinese officials are currently in London for talks aimed at defusing tensions, but export controls remain in place.
The World Bank noted that if global trade disputes are resolved and tariffs are reduced by half, global GDP growth could see an additional 0.2 percentage point boost in both 2025 and 2026.
RBI’s Bold Moves and India’s Domestic Outlook
India’s forecast stability comes on the heels of an aggressive policy shift by the Reserve Bank of India (RBI), which recently cut its policy repo rate by 50 basis points to 5.50%—its second rate cut in 2025, totaling a 100 bps reduction so far this year. With retail inflation expected to remain subdued at 3.7% in FY26, the RBI’s Monetary Policy Committee emphasized the need to stimulate domestic demand and investment to sustain growth momentum.
While the RBI projects FY26 GDP growth at 6.5%, many independent economists are more cautious, with estimates closer to 6%. The government itself has forecast a growth range of 6.3% to 6.8% for the current fiscal year.
Public Debt Targeting and Fiscal Consolidation
The World Bank also pointed to India’s improving fiscal metrics, expecting continued consolidation supported by higher tax revenues and reduced current expenditures. Public debt, which is currently estimated at 56.1% of GDP for FY26, is projected to decline gradually. Starting April 2026, the government will begin officially targeting a debt-to-GDP ratio of 49–51% by FY2031.
GDP data released last month showed that India’s economy grew by 6.5% in FY2024-25, the slowest pace in four years. This slowdown was largely due to weaker industrial output, though steady services performance and a recovery in agriculture helped cushion the impact.
Bottom Line:
India’s growth engine remains strong in a turbulent global economy, even as trade tensions and policy uncertainty weigh on broader investment sentiment. With a resilient services sector, supportive monetary policy, and fiscal discipline, India is well-positioned to navigate the challenges ahead—though global cooperation will be key to unlocking faster growth for all.
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