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World Bank raises India’s economic growth forecast to 7.1% for FY27 on robust domestic demand
Oct-06-2026

The World Bank in its latest October economic update has raised India’s economic growth forecast to 7.1 per cent for fiscal year 2026-27 (FY27) from 6.6 per cent forecasted in April, supported by robust domestic demand and strong exports, despite global headwinds. India's growth accelerated to 7.8 per cent in FY26 from 7.2 per cent in FY25, driven by strong investment and solid private consumption, as the favourable policy and credit environment outweighed trade tensions. It said rural consumption initially outpaced urban demand supported by strong agricultural performance, rural income support, food subsidies, and low inflation, while urban consumption strengthened later in the year following income-tax relief and GST cuts, it said.

It further said that the momentum has carried into FY27, with GDP growing 7.8 per cent in Q1, above expectations, before moderating in subsequent quarters. It noted that the country remains one of the fastest-growing major economies in the world and a key contributor to global growth. As per the World Bank, India’s medium-term prospects are strong but also cautions that external risks are elevated, including downside risks related to global oil prices, el Nino, and stock market corrections that would result in capital flow volatility.

As per the update, private consumption is expected to remain the main driver of growth although a rainfall deficit through August is likely to weigh modestly on rural demand, while subdued government consumption will stay muted. It said the investment outlook is broadly unchanged, with heightened global uncertainty weighing on private investment as frontloading fades, partly offset by supportive financial and policy conditions, including stronger public investment. It added that India's exports have performed better than expected and are likely to provide the main upside to the FY27 growth outlook relative to the April forecasts. 

On the supply side, it said the industry is now forecast to perform better than initially expected and offset a weaker agricultural outlook. Since April, industrial activity has exceeded expectations despite global headwinds. This partially reflects the stronger-than-expected front-loading earlier in the year, with infrastructure and construction goods growth accelerating to 7.2 per cent in Q1 from 6.1 per cent last year, as well as the higher summer utility demand, which drove the electricity sector to expand by 9.3 per cent in Q1 compared to a 1.5 per cent contraction last year. It said although above-average rainfall since July narrowed the monsoon deficit, the overall rainfall shortage during southwest monsoon has weakened agricultural prospects. The World Bank also said the services sector growth remained elevated despite a slowdown from the high base in FY26.
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