World Bank: India’s growth forecast cut for FY2026

New Delhi| The World Bank cut India’s growth forecast for the current fiscal year by 4 percent to 6.3 percent. This decision has been taken amid global economic weakness and policy uncertainty. In its previous estimate, the World Bank had estimated India’s growth rate to be 6.7 percent for the financial year 2025-26.

In its report released twice a year, the World Bank has said that growth in India in FY 2024-25 was disappointing. During this period there was slow growth in private investment and public capital expenditure could not meet government targets.

“In India, the growth rate is expected to decline from 6.5 per cent in FY2024-25 to 6.3 per cent in FY2025-26”, the Taxing Times’ South Asia growth rate update said. This has been done due to fears of the benefits to private investment from monetary easing and regulatory simplification being affected by global economic weakness and policy uncertainty

Earlier, on Tuesday, the International Monetary Fund (IMF) had also reduced India’s GDP forecast for the current financial year to 6.2 percent from 6.5 percent in January.

The World Bank has said in its report that private consumption is expected to benefit from the tax cut. Better implementation of public investment plans would encourage government investment, but export demand would be curbed by changes in trade policy and a slowdown in global growth.

South Asia’s development prospects weakened
The report further said that amid increasing uncertainty in the global economy, South Asia’s growth prospects have weakened and due to this, growth rate estimates have been reduced in most of the countries of the region.

According to the report, accelerating domestic revenue mobilization could help South Asian countries strengthen weak fiscal positions and increase resilience to future shocks. The Washington-headquartered multilateral agency has projected that regional growth will slow to 5.8 percent in 2025. This is 0.4 percent less than the October estimates. A growth rate of 6.1 percent is projected for 2026.

Comments were also made in the report on the economy of Bangladesh and Pakistan
The report said growth in Bangladesh is expected to slow to 3.3 per cent in FY2024-25 amid political uncertainty and persistent financial challenges. The growth rate recovery forecast for FY 2025-26 has been reduced to 4.9 percent.

For Pakistan, the World Bank said its economy is recovering from a combination of natural disasters, external pressures and inflation. It is expected to grow at 2.7 percent in FY 2024-25 and 3.1 percent in FY 2025-26. Regarding Sri Lanka, the report said that the government has made further progress in debt restructuring. The projected rebound in investment and external demand is expected to drive growth to 3.5 percent in 2025. After this, it may reach 3.1 percent in 2026.