India Growth Forecast Held at 6.3% as World Bank Cuts Global Outlook
| 2025-06-11
The World Bank's June 2025 report maintains India's FY26 growth forecast at 6.3%.
India's economy is projected to grow 6.3% in FY26, maintaining its lead among major economies, as the World Bank lowers global growth forecast to 2.3%.
India to Maintain Fastest Growth Rate Amid Global Slowdown, Says World Bank
India is expected to remain the fastest-growing major economy in the 2025–26 fiscal year, with the World Bank maintaining its growth projection at 6.3%, even as it revised the global growth forecast downwards to 2.3%.
The updated figures were released in the World Bank’s Global Economic Prospects – June 2025 report. While the outlook for India remains unchanged from the Bank’s April estimate, it reflects a downward revision from its January projection of 6.7%, due largely to weaker global demand and rising trade restrictions.
India’s Economic Momentum Holds
The World Bank attributed the slower projection for India to subdued industrial activity and a challenging external environment, particularly weaker demand from key trading partners and growing protectionist policies. However, sectors such as construction, services, and rural consumption are expected to remain resilient.
“India is projected to maintain the fastest growth rate among the world’s largest economies,” the report said, highlighting the relative strength of the country's domestic fundamentals amid global uncertainty.
Looking ahead, India’s GDP growth is expected to edge up to 6.5% in the 2026–27 fiscal year and reach 6.7% by FY28, supported by a gradual recovery in exports and continued strength in services and construction.
Global Growth Cut to 2.3%
In contrast, the global economic outlook has worsened. The World Bank now forecasts global GDP growth to slow to 2.3% in 2025—down from its January projection of 2.7%. This marks the weakest non-recessionary growth performance since 2009, outside of global downturns.
Indermit Gill, Senior Vice President and Chief Economist at the World Bank Group, stated, “Only six months ago, a soft landing appeared to be in sight. That moment has passed. The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep.”
Trade Tensions and Geopolitical Risks
The report pointed to a complex combination of geopolitical tensions, trade fragmentation, and rising tariffs as the primary reasons for the global downgrade. It specifically noted the impact of escalating tariff actions, including recent measures by the United States under President Donald Trump, which have dampened trade and raised costs for businesses.
On 2 April, President Trump announced a 27% reciprocal tariff on Indian goods, citing India’s average 52% duty on US imports. Although the tariff was temporarily reduced to 10%, the broader implications for India’s exports remain a concern.
“The global economy faces severe headwinds from a complex interplay of geopolitical conflicts and escalating trade barriers,” the report warned.
The World Bank estimates that more than 70% of global economies experienced growth forecast downgrades in this report, spanning all regions and income levels.
Risks for Emerging Economies
While India’s growth outlook remains relatively strong, the World Bank cautioned that developing countries—including those in South Asia—are increasingly exposed to external shocks.
Key risks include capital outflows triggered by tighter global financial conditions, weakening currencies, and the growing frequency of climate-related disasters. The report also cited the potential for increased social unrest and violence in some regions.
Despite these risks, the Bank noted that if global trade disputes were resolved—such as by halving current tariff levels—world GDP growth could rise by an additional 0.2 percentage points in 2025 and 2026.
For emerging markets and developing economies overall, the World Bank projects a growth rate of 3.8% in both 2025 and 2026, rising slightly to 3.9% in 2027.
China’s growth, by comparison, is expected to moderate gradually to 4.5% in 2025, 4.0% in 2026, and 3.9% in 2027, reflecting the longer-term slowing trend in more mature economies.
Advanced Economies Slowing
Advanced economies are forecast to grow significantly more slowly. The United States is projected to expand by just 1.4% in 2025—0.9 percentage points lower than the World Bank’s January estimate. Growth is expected to reach 1.6% in 2026 and 1.9% in 2027.
Europe is expected to see even lower growth, with output expanding 0.7% in 2025, followed by 0.8% in 2026 and 1.0% in 2027. These figures also represent marked downward revisions.
Context: India in a Fragile Global Economy
India’s relatively strong outlook comes as the global economy remains under pressure from multiple fronts. The ongoing war in Ukraine continues to disrupt key supply chains, drive inflation, and erode investor confidence. Meanwhile, the proliferation of trade barriers is reshaping the international economic landscape.
Although India has managed to weather global turbulence better than many peer economies, continued vigilance will be necessary. The Reserve Bank of India, which recently retained its FY26 growth forecast at 6.5%, has emphasised domestic macroeconomic resilience and structural reforms as key supports.
The World Bank’s latest assessment reinforces India’s position as a relative outlier in a slowing global economy. However, it also underscores the country’s vulnerability to global trade shocks and the importance of maintaining open, rules-based international markets.
“Trade tensions may ease if major economies succeed in reaching lasting agreements that address ongoing disputes,” the report concluded. “But the downside risks to growth still predominate.”
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