Strong demand supports economy, but Middle East conflict may weigh on growth
The World Bank has slightly raised India’s GDP growth forecast for FY27 to 6.6%, while warning that global uncertainties—especially tensions involving Iran—could impact the outlook.
The revised estimate comes amid mixed projections from other institutions, including the Reserve Bank of India (6.9%), OECD (6.1%), and Moody’s Ratings (6%).
Growth driven by strong domestic demand
In its South Asia Economic Update, the World Bank said India’s economy is expected to grow 7.6% in FY26, up from 7.1% in FY25, supported by strong domestic demand and resilient exports.
Private consumption has remained robust, helped by lower inflation and GST rationalisation.
FY27 outlook turns cautious
However, growth is expected to slow to 6.6% in FY27 due to global headwinds.
The report noted that rising energy prices and uncertainty linked to geopolitical tensions could impact household spending and overall economic momentum.
GST cuts to support short-term demand
GST rate cuts are likely to boost consumption in the early part of the fiscal year, but higher fuel and input costs may reduce disposable income over time.
Government spending is also expected to soften due to higher subsidy requirements for fuel and fertilisers.
External risks remain high
The World Bank warned that slower growth in major economies like the United States and the European Union could affect India’s export performance.
It added that the full impact of the Middle East crisis remains uncertain, with growth forecasts across agencies ranging between 5.9% and 6.7%.
Ceasefire offers limited relief
The outlook comes even as a temporary ceasefire between the United States, Iran, and Israel has eased some immediate concerns, though risks to global energy markets remain.
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