World Bank bumps up FY27 India growth outlook to 7.1%

New Delhi: The World Bank on Tuesday raised its India growth forecast for FY27 to 7.1% from 6.6% estimated earlier, citing robust domestic demand and strong exports despite global headwinds. Momentum in the industrial and services sectors is expected to remain strong, it said.

India remains one of the fastest-growing major economies in the world and a key contributor to global growth, according to the World Bank's latest economic update.

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Growth is expected to moderate in the second half of FY27 before recovering over the medium term, but risks remain high, it said. These include higher global oil prices, El Nino-related disruptions and stock market corrections that could trigger volatility in capital flows.

"The country's growth potential remains strong, supported by a series of major reforms, such as labour code consolidation, GST reforms, tariff rationalisation, the Insolvency Act, and infrastructure investments for both the real and digital economy," the World Bank said in its latest South Asia Economic Update.

For FY28, the World Bank projects growth at 7.2%. As energy markets normalise, growth is expected to average 7.1% in FY28-29, with a narrowing current account deficit and declining inflation.

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The multilateral lender said strength across the broader economy is expected to offset weakness in agriculture.

The monsoon deficit appears larger than initially anticipated, with large parts of the country receiving below-normal rainfall. This is expected to weigh on agricultural output and rural demand while pushing up food inflation, adding to existing pressure from higher energy prices, the World Bank said. India's gross domestic product (GDP) grew 7.8% in FY26.

Across South Asia, economic growth is projected at 6.9% in 2026 and 6.7% in 2027.