Source: Business Standard
World Bank cut India’s GDP forecast for financial year 2025-26 (FY26) to 6.3% from earlier 6.7% in October 2024. The lowered estimates detailed in the Bank’s South Asia Development Update released on April 23, 2025 mirror widespread uncertainty about the global economy and its implications for emerging markets like India.
Deceleration in Growth
India’s growth is already beginning to tail off. The report said that GDP growth for the country slumped to 6.5% in FY 2024-25 from 9.2% in FY 2023-24 the slowest since four years, but broadly in line with the long term average of the economy. The World Bank’s Taxing Times report also revised down the growth estimate for FY 2024-25 by 0.5 percentage points.
Balancing Domestic Efforts with Global Challenges
The World Bank emphasized that while India’s ongoing monetary easing and regulatory streamlining are expected to support private investment, their impact may be weakened by persistent global headwinds and rising policy uncertainty.
“The benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty,” said the organisation’s South Asia Development the report stated
Export demand is also expected to remain muted due to changes in trade policies and a general slowdown in global growth. On the domestic front, however, private consumption may benefit from recent tax reductions, and improved execution of public investment plans is likely to boost government spending.
Regional Perspective and Structural Concerns
Martin Raiser, World Bank Vice President for South Asia, pointed out the broader regional vulnerabilities. “Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment,” he said “The region needs targeted reforms to address vulnerabilities such as fragile fiscal positions, backward agricultural sectors, and the impact of climate-related shocks.”
Strengthening domestic revenue mobilization can also reinforce South Asia’s weak fiscal underpinnings and build resilience to future shocks, the report said.
Global Consensus on Slower Growth
The World Bank’s new outlook dovetails with similar downgraded forecasts from other major global institutions. In its World Economic Outlook released Tuesday, the International Monetary Fund (IMF) cut India’s FY26 growth forecast by 30 basis points to 6.2%, attributing the downgrade to intensifying trade tensions and uncertainty globally.
