World Bank Raises India's GDP Growth Forecast To 7.1% For This Fiscal
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.
The World Bank has increased India's economic growth forecast for the fiscal year 2027 (FY27) to 7.1%, a 50 basis point rise from its previous estimate of 6.6%. This upward revision comes from strong industrial and services activity that has offset the slowdown in agriculture sector. The World Bank forecast for India's growth in FY28 is 7.2%.
India's economy expanded by 7.8% in FY26, which was slightly higher than the World Bank's earlier estimate. The growth is anticipated to be driven by robust domestic demand and momentum in industry and services sectors. The World Bank also highlighted several factors that contribute to India's long-term growth prospects, such as the consolidation of labor codes, Goods and Services Tax (GST) reforms, tariff rationalization, the Insolvency Act, and investments in physical and digital infrastructure.
India plays a crucial role in shaping the growth trajectory of the South Asian region. The region is expected to grow by 6.9% in 2026 and 6.7% in 2027. Excluding India's contribution, the growth rate is projected to be 3.6% and 3.8% for the respective years.
In terms of artificial intelligence (AI) adoption, the World Bank identified AI as a potential driver of productivity growth in India. In its survey, the Bank found that 23.4% of formal Indian firms use some form of AI, compared to 42.7% in the United States. The AI Adoption Index for India stands at 0.27, whereas the US scores 0.85.
Only 3.5% of Indian firms reported paying for AI software or subscriptions, as opposed to 23.1% of US companies. However, AI adoption in Indian companies has seen a significant surge since late 2024, despite being close to zero in mid-2024.
Infrastructure and skills are considered crucial for accelerating AI growth in India. Around 72% of Indian firms stated that improved digital infrastructure would foster greater AI adoption, while 55% cited enhancements in tertiary education. Nevertheless, expectations of productivity gains from faster AI development in the coming three years are mixed.
Nearly three-quarters of Indian firms anticipate zero or negligible productivity gains, while only about 8% expect gains of 20% or more. The report also revealed that links between US customers and South Asian suppliers, particularly in sectors with high exposure to AI, have grown the fastest, challenging the notion that generative AI would primarily lead to the repatriation of outsourced work to advanced economies.
Written by urgent.news from Free Press Journal's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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