The World Bank has projected India's gross domestic product growth at 6.5% for the financial year 2026-27, followed by 6.6% growth in FY28, according to its semi-annual Global Economic Prospects report released on Tuesday. These projections position India as the fastest-growing economy among the world's largest nations, significantly outpacing global economic growth expectations.

Current Fiscal Performance and Growth Drivers

For the current fiscal year ending March 31, 2026, India's GDP growth is estimated at 7.2%, reflecting strong economic fundamentals. The multilateral financial institution attributed this robust performance to several key factors:

The World Bank emphasized that domestic demand remains the primary engine of India's economic growth, with private consumption showing particular strength due to earlier tax reforms and improvements in real household earnings, especially in rural areas.

Export Resilience Despite Trade Challenges

Despite facing steep 50% US import tariffs on many Indian goods, India's export sector has demonstrated remarkable resilience. Merchandise exports registered growth in November, reflecting the economy's adaptability to challenging trade conditions. The World Bank noted that this performance "partly reflects buoyant demand from the United States and other trading partners, supported by efforts to diversify export markets to increase resilience."

The United States accounts for approximately 12% of India's merchandise exports, making the tariff impact significant yet manageable. The World Bank's growth forecast has remained unchanged relative to June projections, indicating that adverse impacts from higher tariffs will be offset by stronger domestic demand momentum and more resilient exports than previously anticipated.

Global Economic Context and Comparative Performance

India's projected growth rates stand in stark contrast to global economic projections for calendar year 2026:

The World Bank assumes that US tariff rates will remain in place throughout the forecast horizon, yet India is expected to maintain its position as the fastest-growing major economy globally.

Future Outlook and Economic Indicators

Looking ahead to FY28, growth is expected to inch up to 6.6%, underpinned by robust services activity, export recovery, and increased investment activity. The World Bank projects that inflation will converge to the Reserve Bank of India's 4% target by FY27, assuming stable seasonal conditions help contain food price inflation.

Fiscal consolidation is set to continue over the next three years, with the effects of tax cuts being outweighed by declining current spending. This approach is expected to result in a gradual reduction in the public debt-to-GDP ratio, strengthening India's fiscal position while maintaining growth momentum.

The global economy is demonstrating greater resilience than anticipated despite facing historic levels of trade disruption and policy uncertainty, according to the World Bank's latest Global Economic Prospects report. However, this recovery remains markedly uneven, with a significant portion of developing economies still struggling to regain pre-pandemic economic levels.

Growth Projections and Regional Disparities

The World Bank has revised its global growth projections upward, forecasting economic expansion of 2.6% in 2026 and 2.7% in 2027. This represents an improvement from the institution's June forecast, with the United States accounting for nearly two-thirds of the upward revision for 2026.

Despite these projections, the report cautions that if current trends continue, the 2020s will emerge as the weakest decade for global growth since the 1960s. The sluggish growth is creating widening income disparities between nations, with almost all advanced economies achieving per capita incomes above 2019 levels by the end of 2025, while approximately one in four developing economies remained poorer than before the pandemic.

Temporary Growth Drivers and Future Challenges

Growth in 2025 received support from a pre-emptive surge in trade ahead of anticipated policy changes and rapid adjustments in global supply chains. However, these temporary tailwinds are expected to fade in 2026 as trade momentum and domestic demand soften. The World Bank anticipates that easing global financial conditions and fiscal expansion in several large economies will help cushion the anticipated slowdown.

Global inflation is projected to moderate to 2.6% in 2026, reflecting softer labour markets and lower energy prices. Growth is expected to strengthen modestly in 2027 as trade patterns adjust and policy uncertainty diminishes.

Expert Analysis and Policy Recommendations

Indermit Gill, Chief Economist of the World Bank Group, highlighted a concerning trend: "With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty. But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets."

Gill warned that the world economy is positioned to grow more slowly than during the troubled 1990s while carrying record levels of public and private debt. To avoid stagnation and unemployment, he emphasized that governments must:

• Liberalize trade and private investment
• Rein in public consumption
• Invest aggressively in education and new technologies

Developing Economies Face Mounting Pressures

Developing economies are projected to experience a deceleration in growth, slowing to 4.0% in 2026 from 4.2% in 2025, before recovering slightly to 4.1% in 2027. This improvement is expected as trade tensions ease, commodity prices stabilize, and financial conditions improve.

The report identifies a critical jobs challenge, particularly in developing countries where an estimated 1.2 billion young people will enter the working-age population over the next decade. Addressing this challenge requires a comprehensive three-pronged policy approach: strengthening physical, digital and human capital; improving policy credibility and regulatory certainty to encourage firm expansion; and mobilizing private capital at scale to boost investment.

Fiscal Sustainability and Policy Solutions

The World Bank emphasized the urgent need to restore fiscal sustainability in developing economies, which has deteriorated due to overlapping economic shocks, rising development needs, and higher debt-servicing costs. Public debt in emerging and developing economies has reached its highest level in more than 50 years.

A special chapter of the report examines fiscal rules, such as limits on deficits, debt, or spending, which are now implemented in more than half of developing economies. Countries adopting such rules typically see budget balances improve by an average of 1.4 percentage points of GDP after five years.

M. Ayhan Kose, the World Bank's Deputy Chief Economist, stressed the importance of fiscal discipline: "With public debt at historic highs, restoring fiscal credibility has become an urgent priority. Fiscal rules can help, but their success ultimately depends on strong institutions, credible enforcement and sustained political commitment."