World Bank Raises India’s FY27 Growth Forecast to 7.1 pc on Strong Domestic Demand

World Bank Raises India’s FY27 Growth Forecast to 7.1 pc on Strong Domestic Demand

New Delhi, Oct 6: The World Bank has raised its forecast for India’s economic growth in FY27 to 7.1 per cent from 6.6 per cent earlier, pointing to resilient domestic consumption and stronger-than-expected economic activity.

The upgrade comes despite continued challenges from elevated energy prices, inflationary pressures and an uncertain global environment. The latest assessment suggests that India’s strong domestic market is helping the economy absorb external shocks while maintaining its growth momentum.

Domestic consumption provides a strong cushion

India’s large consumer base continues to be one of the strongest pillars of its economy. Steady demand for goods and services has helped businesses maintain activity even as input and energy costs remain under pressure.

The World Bank has also revised upward its growth outlook for South Asia to 6.9 per cent in 2026, compared with 6.3 per cent earlier, with India expected to account for a significant share of the region’s expansion.

Strong GDP performance supports optimism

The revised outlook follows 7.8 per cent real GDP growth in India during the April-June quarter, highlighting the strength of economic activity at the beginning of the fiscal year.

Continued infrastructure investment, digital expansion and policy reforms are supporting businesses across manufacturing, services, technology and other sectors. Strong domestic demand could further encourage companies to expand capacity, increase investment and create jobs.

Energy costs remain a key concern

The positive outlook is accompanied by risks, particularly from global energy prices.

Higher crude oil prices can raise transportation, manufacturing and logistics costs and put pressure on household spending. As India relies significantly on imported energy, international oil prices remain an important factor influencing inflation and economic growth.

The potential impact of El Niño and other weather disruptions is another factor to watch, particularly because weaker agricultural output could affect food prices and rural consumption.

AI offers fresh productivity opportunities

Artificial intelligence is also emerging as a potential driver of productivity for Indian businesses.

The World Bank assessment indicates that around 23 per cent of Indian firms report using AI, compared with approximately 43 per cent in the United States. While adoption remains lower, the gap represents considerable room for expansion.

Greater use of AI, combined with investment in digital infrastructure and workforce skills, could help Indian companies improve efficiency, develop new products and services and compete more effectively in global markets.

India’s domestic economy remains resilient

The World Bank’s decision to raise the FY27 growth forecast to 7.1 per cent offers a positive signal for businesses and investors amid continuing global uncertainty.

The key challenge will be to preserve the momentum of consumption and investment while managing inflation, energy costs and external risks. Continued reforms, infrastructure development and productivity-enhancing technology could strengthen India’s growth prospects further.

The latest forecast underlines the growing importance of India’s domestic demand as a stabilising force, reinforcing the country’s position as one of the world’s major engines of economic growth.