World Bank raises India’s FY27 growth forecast to 6.6%, flags West Asia conflict

The World Bank has marginally raised India’s growth projection for FY26-27 to 6.6% while cautioning that raging geopolitical tensions in West Asia could weigh on economic momentum. 

The latest estimate compares with projections of 6.9% by the Reserve Bank of India, 6.1% by the Organisation for Economic Co-operation and Development, and 6% by Moody’s Ratings. 

In its South Asia Economic Update released on Wednesday, the World Bank said India’s growth likely accelerated from 7.1% in FY24-25 to 7.6% in FY25-26, supported by strong domestic demand and resilient exports. 

Private consumption remained robust 

Private consumption remained robust, aided by low inflation and rationalisation of the Goods and Services Tax. However, growth is expected to moderate in FY26-27. “Growth is projected to decelerate to 6.6%, reflecting headwinds from the Middle East conflict,” the report said. 

While GST rate cuts are expected to support consumer demand in the first half of the fiscal, higher global energy prices could exert upward pressure on inflation and reduce household disposable income. 

The report also flagged softer government consumption growth due to higher subsidy outlays on cooking fuel and fertilisers. Investment activity is likely to moderate amid rising input costs and heightened uncertainty. 

Although improved market access to the U.S. and the European Union could support exports, slower growth in key trading partners may offset these gains. 

Earlier projection for India 

The World Bank had earlier projected India’s growth at 6.5% for FY26-27 in its Global Economic Prospects report released in January. 

It added that the economic impact of the ongoing Middle East crisis remains highly uncertain, with other forecasters revising growth estimates to a range of 5.9% to 6.7%. 

The tensions involving the U.S. and Israel against Iran triggered retaliatory action from Tehran. A temporary two-week ceasefire was agreed upon on April 8, offering some respite to global energy markets, though risks persist. 

Recently, Moody’s Ratings cut India’s GDP growth forecast for FY26-27 to 6% from 6.8%, citing the economic impact of the ongoing West Asia conflict. In its latest credit opinion, the agency said prolonged geopolitical tensions could dampen growth momentum while heightening inflationary pressures.

The agency also flagged supply disruptions—particularly in LPG shipments—as a key near-term risk, warning of potential household shortages and rising fuel and transportation costs. These pressures, it added, could spill over into food inflation, given India’s dependence on imported fertilisers.