Many of these medical interventions deliver only marginal benefits and can actually harm the patients, leading to unnecessary suffering, especially among the frail and elderly, it said.
The harmful practice can worsen as, it said, many more people will be able to afford healthcare as the government ramps up medical coverage for poor households.
"Medical overuse is emerging as a serious issue in India, especially as more people can afford to pay for medical interventions due to increasing access to insurance cover.
Therefore, India urgently needs to learn from the experience of other countries and build in checks against this hazard, especially as it allocates a growing share of scarce public resources for medical insurance," it said.
The World Bank's warning comes amid concern expressed by Health Minister Harsh Vardhan over "corruption" in regulatory body Medical Council of India and the "nexus" of doctors and diagnostic centres, resulting in patients being asked for unnecessary tests.
"This is a critical time for India since the country is in the midst of building a healthcare system which will set conditions for decades to follow," said Somil Nagpal, senior health specialist with the World Bank in India.
Prescribing unnecessary medical tests, procedures, hospitalisations and surgeries have become an epidemic worldwide, the World Bank said, adding the rates of caesarian sections, for instance, vary widely.
While globally the C-section rate in public hospitals is 10 percent, it reaches an alarming 98 percent in Brazils private hospitals, and 40 percent in private hospitals worldwide.
In the US alone, unnecessary medical care costs $250-300 billion annually by conservative estimates, it said, cautioning against the growing danger of the worldwide overuse of antibiotics that is causing a surge in hard-to-treat bugs.
The World Bank has identified the culture of "more medical intervention is better", "slavish" use of medical technology even when it is not necessary and defensive medicine or "playing it safe" by prescribing additional tests or treatment among the leading factors behind the trend.