World Bank estimates 7.2% growth for FY26, 6.5% for FY27

World Bank on Tuesday pegged FY26 growth rate at 7.2 per cent which is lower than government’s projection of 7.4 per cent. For the next fiscal, the growth rate could be 6.5 per cent.

“Growth in India is projected to slow to 6.5 percent in FY2026/27, assuming that the 50 percent import tariffs by the United States remain in place throughout the forecast horizon,” the Bank said in its latest Global Economic Prospects report.

Further it said that despite higher tariffs on certain exports to the United States, the growth forecast has remained unchanged relative to June projections, primarily because the adverse impacts of higher tariffs will be offset by stronger momentum in domestic demand than previously anticipated.

“Growth is set to inch up to 6.6 per cent in FY2027/28, underpinned by robust services activity, as well as a recovery in exports and a pickup in investment,” the report said.

Global Economy

According to the report, global growth is projected to remain broadly steady over the next two years, easing to 2.6 per cent in 2026 before rising to 2.7 per cent in 2027, an upward revision from the June forecast.

“The global economy is proving more resilient than anticipated despite persistent trade tensions and policy uncertainty,” it said.

In 2025, growth was supported by a surge in trade ahead of policy changes and swift readjustments in global supply chains. These boosts are expected to fade in 2026 as trade and domestic demand soften.

However, the easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown, according to the report. 

“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics.

However, he cautioned that economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets.

Over the coming years, the world economy is set to grow slower than it did in the troubled 1990s—while carrying record levels of public and private debt.

“To avert stagnation and joblessness, governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education,” he said.

The report expects growth in developing economies in 2026 to slow to 4 per cent from 4.2 per cent before edging up to 4.1 per cent in 2027 as trade tensions ease, commodity prices stabilize, financial conditions improve, and investment flows strengthen.

Growth is projected to be higher in low-income countries, reaching an average of 5.6 per cent over 2026–27, buoyed by firming domestic demand, recovering exports, and moderating inflation.

However, “this will not be sufficient to narrow the income gap between developing and advanced economies. Per capita income growth in developing economies is projected to be 3 per cent in 2026—about a percentage point below its 2000-2019 average. At this pace, per capita income in developing economies is expected to be only 12 per cent of the level in advanced economies.

Published on January 13, 2026