World Bank Revises India’s FY26 Growth Forecast to 7.2% Amid Strong Domestic Demand

The World Bank has raised India’s economic growth projection for the current financial year (FY2025-26), citing robust domestic demand as a primary driver of expansion. In its latest Global Economic Prospects report, the Bank now expects India’s GDP to grow by 7.2%, up from the previous forecast of 6.3%. The revision underscores the resilience of India’s economy despite global challenges, including trade tensions and uncertainties in advanced economies.

The World Bank revises India's GDP growth rate for FY26 and FY27. | News18

Domestic Consumption Powers Economic Growth

At the heart of India’s economic resilience is the strength of private consumption. Rising real household incomes, particularly in rural areas, have boosted consumer spending, fueling growth across sectors such as services, retail, and manufacturing. Policy reforms and structural measures over the past years have further supported domestic activity, making India’s internal market a critical engine of growth.

The World Bank highlighted that sustained household demand and rising urban and rural incomes have countered the slowdown experienced by many other emerging markets. As a result, domestic consumption remains the most reliable pillar sustaining India’s expansion amid global uncertainties.

Trade Challenges and Resilient Exports

While India has faced pressures from global trade tensions, including tariffs imposed on certain exports to the United States, the impact has been moderated by resilient exports and the strength of the domestic market. Sectors such as IT and business services have performed particularly well, ensuring that the economy remains insulated from external shocks. The World Bank noted that India’s diverse export base and growing integration into global value chains have contributed to maintaining stability despite trade hurdles.

Medium-Term Outlook

Looking beyond FY26, the World Bank projects a slight moderation in growth, with expectations of around 6.5% in FY2026-27 and 6.6% in FY2027-28. This continued expansion will be supported by the recovery of exports, sustained consumption, and gradual investment growth. Other international agencies, including the Asian Development Bank (ADB) and S&P Global Ratings, also forecast India’s growth in the 6.5–7.2% range, emphasizing the role of domestic demand and structural reforms.

Despite the optimism, the Bank cautioned that global uncertainties, such as protectionist trade policies, tightening financial conditions, and supply-chain bottlenecks, could affect the pace of growth. Policymakers are encouraged to maintain reforms that strengthen infrastructure, human capital, and investment to sustain long-term economic momentum.

Global Context

India’s growth outlook stands in contrast to slower expansion globally. The World Bank’s report forecasts the overall global economy will grow at about 2.6% in 2026, highlighting the relative strength of India and other select emerging markets. This divergence illustrates how domestic market strength and policy measures can buffer an economy against global volatility.

The MGMM Outlook

The World Bank’s upward revision of India’s FY26 growth forecast to 7.2% underscores the resilience and strength of the country’s domestic economy. Private consumption, fueled by rising household incomes across rural and urban areas, has emerged as the central driver of this expansion, supporting sectors from retail and services to manufacturing. Policy reforms and structural measures over recent years have further strengthened domestic activity, enabling India to withstand global economic uncertainties that have slowed many other emerging markets. Even in the face of trade challenges and tariffs on certain exports, robust domestic demand has acted as a buffer, keeping the economy on a strong growth trajectory.

India’s export sector has shown notable resilience, particularly in IT and business services, reflecting the country’s growing integration into global value chains. While medium-term projections indicate a slight moderation in growth to around 6.5–6.6% in the following years, continued consumption, gradual investment expansion, and recovering exports are expected to sustain economic momentum. Compared to the projected global growth of just 2.6% in 2026, India’s relative strength highlights how internal market dynamics, diversified exports, and strategic policy measures can shield an economy from external shocks and global volatility.

(Sources: News18, Economic Times, Business Standard)