The World Bank has upheld its forecast for India’s GDP growth at 6.3% for the fiscal year 2026, as outlined in its latest Global Economic Prospects report. This decision comes amid rising global trade barriers and weaker export demands due to reduced activity among key trading partners.

Despite these obstacles, India is expected to maintain its position as the fastest-growing major economy worldwide. The report highlights that India’s economic resilience is a testament to its robust domestic demand and strategic economic policies, which have helped cushion the impact of global uncertainties.

Finance Minister Nirmala Sitharaman, in her FY26 Budget, announced a strategic shift in fiscal targets, moving towards a debt-to-GDP ratio as the fiscal anchor. The government aims to decrease this ratio to 50% by FY31, with a one percentage point deviation allowed. This move is part of a broader effort to ensure fiscal consolidation and enhance economic stability. The shift reflects a long-term vision to maintain fiscal discipline while supporting growth initiatives across various sectors.

The World Bank’s unchanged forecast underscores India’s economic resilience, despite a slight moderation in growth to 6.5% for FY25, as reported by the National Statistical Office (NSO). The report highlights steady growth in India’s construction and services sectors, supported by a recovery in agricultural output from previous drought conditions and resilient rural demand. These sectors have been pivotal in sustaining economic momentum, contributing significantly to job creation and income generation in rural areas.

However, the World Bank has flagged several risks for South Asia, including potential trade barriers from major partners and increased global trade policy uncertainty.

The report stated: “Higher-than-expected global inflation and a decline in risk appetite could lead to a tightening of global financial conditions, potentially weakening currencies in the region and causing capital outflows.” These factors present challenges for maintaining economic stability.

The report suggested that proactive measures and policy adjustments are essential to navigate these challenges effectively.

The report also emphasized the need for developing economies to pursue strategic trade and investment partnerships, suggesting that a broader liberalization of trade through regional agreements could mitigate some risks.

The World Bank projected global growth to slow to 2.3% in 2025, the weakest in 17 years, excluding recessions, but mentions that mitigation of trade tensions could lead to a quicker rebound than currently anticipated. This underscores the importance of international cooperation and dialogue in fostering a stable economic environment.

In contrast, the International Monetary Fund (IMF) recently adjusted its growth forecast for India down to 6.2% for FY26, highlighting escalating trade tensions and global economic uncertainty as contributing factors. Nevertheless, the World Bank remains optimistic about India’s growth trajectory, reinforcing its projection that “India would maintain the fastest growth rate among the world’s largest economies, at 6.3 per cent in FY26.” This optimism is grounded in India’s ongoing reforms and investments in infrastructure and technology, which are expected to drive future growth.