World Bank raises India's FY27 growth forecast to 7.1 pc on strong domestic demand, exports

The World Bank on Tuesday raised its forecast for India's GDP growth in the current fiscal by 50 basis points to 7.1 per cent, citing resilient domestic demand and stronger-than-expected exports despite global trade and geopolitical uncertainties.

In its latest India Development Update, the multilateral lender said it had upgraded its FY27 growth projection from 6.6 per cent estimated in April.

"We have upgraded our FY27 growth forecast to 7.1 per cent from 6.6 per cent in April, as growth has held up better than expected despite trade and geopolitical uncertainties," it said.

India remains among the world's fastest-growing major economies and a key contributor to global growth, the World Bank said.

The Indian economy grew 7.8 per cent in FY26, accelerating from 7.2 per cent in FY25, driven by strong investment and private consumption. The World Bank said a favourable policy and credit environment helped offset the impact of trade tensions.

GDP growth remained at 7.8 per cent in the first quarter of FY27, exceeding expectations, though the pace is expected to moderate in subsequent quarters.

Private consumption is likely to remain the main driver of growth, although a rainfall deficit through August could weigh modestly on rural demand. Government consumption is expected to remain subdued, the World Bank said.

Rural consumption initially outpaced urban demand on the back of strong agricultural performance, while urban consumption strengthened later, supported by income-tax relief and GST cuts.

The investment outlook remained broadly unchanged, with heightened global uncertainty weighing on private investment as the effect of front-loading fades. This is expected to be partly offset by supportive financial and policy conditions, including stronger public investment.

Exports, meanwhile, have performed better than expected and are likely to provide the main upside to the FY27 growth outlook compared with the April forecast, it said.

On the supply side, the World Bank raised its outlook for industry while lowering its assessment of agriculture. Industrial activity has exceeded expectations despite global headwinds.

Infrastructure and construction goods growth accelerated to 7.2 per cent in the first quarter from 6.1 per cent a year earlier, partly reflecting stronger front-loading earlier in the year. Higher summer electricity demand also pushed growth in the power sector to 9.3 per cent in the first quarter, compared with a 1.5 per cent contraction a year earlier.

Although above-average rainfall since July narrowed the monsoon deficit, the overall shortage during the southwest monsoon has weakened agricultural prospects, the World Bank said.

Services activity also remained strong despite moderating from the high base recorded in FY26.

The World Bank cautioned that external risks remained elevated, including those arising from global oil prices, El Nino and potential stock market corrections that could trigger volatility in capital flows.

Assuming energy supply chains return to pre-conflict conditions in early 2027, India's growth is projected to accelerate to 7.2 per cent in FY28 before easing to 7 per cent in FY29, in line with its medium-term potential.

The World Bank said recent reforms, including GST rationalisation, trade and foreign direct investment liberalisation, labour-market measures and steps to improve access to finance for MSMEs, were expected to gain momentum and support medium-term growth.

Other global institutions have also recently raised their growth forecasts for India.

The OECD increased its FY27 projection by 80 basis points to 7.1 per cent, while the Asian Development Bank raised its forecast to 7 per cent from 6.6 per cent, citing resilient domestic demand and lower-than-expected supply disruptions amid the West Asia conflict.