The World Bank has marginally raised India’s growth projections for FY27 to 6.6%, as per a report by PTI. The World Bank said that although GST rate cuts would boost consumer demands in the initial months of the fiscal, headwinds arising from the Middle East crisis could dent growth.
Interestingly, the World Bank in its Global Economic Prospects report in January had projected India to grow 6.5% in FY27. This FY27 projection is slightly lower than the 6.9% projection by the RBI and a tad higher than the 6.1% estimates by the OECD and 6% by Moody’s Ratings.
“Growth is projected to decelerate to 6.6% in FY27, reflecting headwinds from the Middle East conflict,” the World Bank stated, according to PTI.
World Bank sees govt spending easing
Government consumption growth is expected to soften to set higher subsidy outlays for cooking fuel and fertilizers. Investment growth is likely to moderate amid elevated uncertainty and rising input costs, the World Bank said.
Improved access to the United States and the European Union for India’s exports will be undermined by slower growth in major trading partners, it added.
Middle East conflict clouds outlook
The World Bank said the impact of the Middle East crisis is highly uncertain and other forecasters have revised down their growth projections to a range between 5.9% and 6.7% for FY27.
On February 28, the United States and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran. The war resulted in the disruption of the Strait of Hormuz, a global supply route.
On April 8, Iran, the United States and Israel agreed on a two-week ceasefire in the war that tore across the Middle East and disrupted the global energy market.
World Bank – India growth seen at 7.6% in FY26
In its South Asia Economic Update report released on Wednesday, the World Bank said India’s growth is estimated to have accelerated to 7.6% in FY26 from 7.1% in FY25, owing to strong domestic demand and export resilience.
The provisional annual GDP for FY26 is scheduled to be released by the government on May 29.
Private consumption growth was particularly robust, supported by low inflation and the rationalisation of the Goods and Services Tax (GST).
The World Bank noted that the reduction in GST rates should continue to support consumer demand in the first half of FY27. However, elevated global energy prices are expected to put upward pressure on prices and constrain households’ disposable income.
With the inputs from PTI