World Bank raises India growth forecast to 6.6% for 2026-27 from 6.3% earlier

Even as growth across the region slows, India continues to stand out as the main engine, providing a sense of stability at a time when the broader economic outlook remains uncertain.

In Short

• South Asia's overall growth expected to slow due to global tensions
• Risks include energy import reliance and impact of Middle East conflict
• Other South Asian economies show uneven growth amid mixed industrial policy results

India is expected to remain the strongest pillar of South Asia’s economy, even as global uncertainties continue to weigh on the region. The World Bank has revised India’s growth forecast for 2026-27 upward to 6.6 percent, from an earlier estimate of 6.3 percent, signalling confidence in the country’s resilience despite external pressures.

The revised outlook comes at a time when South Asia is dealing with growing pressure from geopolitical tensions and volatile energy markets. Even as the region’s overall growth slows, India continues to stand out as the main driver, offering a degree of stability in an otherwise uncertain economic climate.

The World Bank’s latest South Asia Economic Update shows the region’s growth is set to slow to 6.3 per cent in 2026, from 7.0 per cent in 2025. Much of this dip is tied to the ongoing Middle East conflict and unstable global energy markets, which have put extra pressure on economies that rely heavily on imports.

Even so, India appears to be holding its ground. The economy is expected to grow 7.6 per cent in 2025-26 before easing slightly to 6.6 per cent in 2026-27. The upward revision suggests strong domestic demand is helping cushion the impact of global uncertainties affecting the wider region.

"Despite a challenging global environment, South Asia’s growth prospects remain strong," said Johannes Zutt, World Bank Vice President for South Asia, as quoted by Reuters.

The World Bank has warned that several risks could easily push South Asia off course. A key concern is the region’s heavy reliance on imported energy, which makes it vulnerable to swings in global oil prices. Any escalation in the Middle East conflict could drive up inflation, force central banks to tighten policy and weaken remittance flows that many economies depend on.

AJAY BANGA WARNS OF GLOBAL SLOWDOWN IMPACT

World Bank President Ajay Banga cautioned that the conflict is likely to slow global growth and keep inflation elevated, no matter how quickly it ends. These pressures are expected to spill over into emerging markets, including South Asia, adding to existing economic stress. The report also points to deeper structural challenges, such as climate shocks and financial instability, which could further delay recovery and make growth less stable.

While India continues to anchor the region, the performance of other economies remains uneven. Bangladesh is expected to grow 3.9 per cent in 2025-26 as it recovers from political unrest, while Bhutan is projected to expand by 7.1 per cent, supported by hydropower projects.

Sri Lanka’s growth is likely to slow to 3.6 per cent in 2026, down from 5.0 per cent in 2025, mainly due to higher energy costs. The Maldives could see a sharp slowdown to 0.7 per cent as tourism, fuel expenses and financing conditions tighten. Nepal is forecast to grow 2.3 per cent, with a gradual pickup expected as domestic disruptions ease.

South Asian countries have stepped up industrial policy efforts at a faster pace than many other emerging markets. However, the results have been mixed. Measures aimed at restricting imports have reduced inflows, but efforts to boost exports have not delivered meaningful gains so far.

- Ends
With inputs from agencies