Global Headwinds Prompt World Bank to Lower India's Growth Forecast

The World Bank has adjusted India's GDP growth forecast for the fiscal year 2025-26 to 6.3%, a decrease from the previous estimate of 6.7%. This revision is attributed to global economic challenges and domestic policy uncertainties, as highlighted in the bank's latest South Asia Development Update.

Impact of Global and Domestic Factors

According to the report, the anticipated benefits of monetary easing and regulatory reforms in India are likely to be offset by weaker global economic conditions and policy uncertainties. The World Bank also noted that India's current fiscal performance has been below expectations, partly due to lower private investment and public capital expenditure shortfalls.

Regional Growth Projections Adjusted

The report further reveals that growth projections across South Asia have been broadly downgraded, with the region expected to grow at 5.8% in 2025, slightly recovering to 6.1% in 2026. It emphasizes the need for improved domestic revenue collection to strengthen fiscal resilience against future shocks.

Neighboring Countries' Economic Outlook

Among India's neighbors, Bangladesh's growth is projected to decline to 3.3% in FY2024-25 due to political and financial challenges, while Pakistan expects a modest recovery to 2.7% in the same period. Sri Lanka, on the other hand, is projected to grow by 3.5% in 2025, supported by debt restructuring and improved investment.