World Bank lifts GDP outlook for FY26, tariffs to hurt next yr

The multilateral lender expects India to remain the world’s fastest-growing major economy

- Rhik Kundu

The World Bank on Tuesday raised India’s economic growth forecast for 2025-26 to 6.5% from 6.3% projected in June, even as it trimmed its 2026-27 estimate by 20 basis points to 6.3%, citing the impact of steeper-than-expected US tariffs on Indian exports.

“India is expected to remain the world’s fastest-growing major economy, underpinned by continued strength in consumption growth. Domestic conditions, particularly agricultural output and rural wage growth, have been better than expected,” the World Bank said in its biannual South Asia Development Update (October 2025).

“The government's reforms to the goods and services tax (GST)—reducing the number of tax brackets and simplifying compliance—are expected to support activity. The forecast for FY26/27 has been downgraded, however, as a result of the imposition of a 50% tariff on about three-quarters of India’s goods exports to the US,” it added.