06 October,2026 07:53 PM IST | New Delhi | mid-day online correspondent
Representational Image. File pic.
The World Bank on Tuesday raised India's GDP growth forecast for the current financial year to 7.1 per cent led by robust domestic demand and strong exports, despite global uncertainties.
"We have upgraded our FY27 growth forecast to 7.1 per cent from 6.6 percent in April, as growth has held up better than expected despite trade and geopolitical uncertainties," the World Bank said in its latest India Development Update.
It added that India remains one of the fastest-growing major economies in the world and a key contributor to global growth.
India's GDP grew 7.8 per cent in FY26 from 7.2 per cent in FY25, driven by strong investment and solid private consumption, and the World Bank said the favourable policy and credit environment outweighed trade tensions.
"The momentum has carried into FY27, with GDP growing 7.8 per cent in Q1, above expectations, before moderating in subsequent quarters," it said.
It expects private consumption to remain the main driver of growth, although a rainfall deficit through August is likely to marginally impact rural demand, while subdued government consumption will stay muted.
However, it noted that compared with the April forecasts, risks remain elevated and tilted to the downside, particularly from the duration and intensity of the Middle East conflict.
It however cautioned that while the medium term prospects are strong, the external risks are related to global oil prices, El Nino, and stock market corrections elevated, which would result in capital flow volatility.
"Assuming the energy supply chain returns to pre-conflict conditions in early 2027, growth is projected to accelerate to 7.2 percent in FY28 before easing to 7.0 percent in FY29, in line with the economy's medium-term potential. The government's recent reform programs, including GST rationalisation, trade and FDI liberalisation, labour market reforms, and measures to improve access to finance for MSMEs, are expected to gain momentum over the medium term, supporting growth," it said.
India's current account deficit is estimated to widen to 1.5 percent of GDP in FY27 before narrowing to 1.2 percent in FY28 and 0.6 percent in FY29, it said.
"While strong domestic demand is expected to sustain imports, continued growth in services exports and improving merchandise exports should help contain external imbalances. Net foreign direct investment inflows are expected to rise to around 0.6 percent of GDP over the medium term, comfortably covering the current account deficit alongside other capital inflows," it said.
Besides, the report said that India is well positioned to harness artificial intelligence (AI), thanks to its large technical workforce, globally integrated IT sector, and digital public infrastructure.
