World Bank Projects India to Drive South Asia Growth with 7.6% Expansion in FY26

The latest report by the World Bank highlights that India is expected to remain the main driver of economic growth in South Asia, even as global uncertainties continue to create pressure on economies worldwide.

India to Stay the Growth Engine

According to the World Bank’s South Asia Economic Update, India’s economy is projected to grow strongly at 7.6% in FY26. However, growth may slow slightly to 6.6% in FY27.

South Asia’s Growth Outlook

The report says that overall growth in South Asia may slow down to 6.3% in 2026, compared to 7.0% in 2025. This slowdown in mainly due to:

• Ongoing conflict in the Middle East
• Rising global energy prices
• Uncertainty in international markets

However, growth is expected to improve again to 6.9% in 2027, making South Asia one of the fastest-growing regions in the world.

Risks Due to Energy Dependence

One major concern highlighted in the report is that South Asian countries depend heavily on imported energy.

Because of this, any disruption in global energy supply can:

• Increase inflation
• Force central banks to raise interest rates
• Reduce money sent home by workers abroad (remittances)

Inflation May Rise Again

Inflation in many South Asian countries was under control in early 2026. But now, the World Bank warns that:

• Rising fuel prices
• Weakening local currencies

could lead to higher inflation in the coming months, especially if these trends continue.

India’s Inflation Outlook

In India, inflation is expected to rise slightly in FY26 and FY27 due to:

• Strong domestic demand
• Increasing energy costs
• Stabilising food prices

This means prices may go up, but the economy will still remain strong.

Impact of Global Conflicts

World Bank President Ajay Banga has warned that the conflict in the Middle East could:

• Slow down global economic growth
• Increase inflation across countries

This impact may continues even if the conflict ends soon.

Need for Reforms in South Asia

World Bank official Johannes Zutt said that despite global challenges, South Asia has strong growth potential.

However, countries in the region need to:

• Bring structural reforms
• Create more jobs
• Strengthen their economies against global shocks

Different Growth Trends Across Countries

Growth is not the same across all South Asian nations. The report gives different forecasts:

• Bangladesh: 3.9% growth as it recovers from political issues.
• Bhutan: 7.1% growth due to hydropower projects.
• Sri Lanka: Growth slowing to 3.6% due to high energy costs.
• Maldives: Sharp slowdown to 0.7% because of tourism and fuel issues.
• Nepal: 2.3% growth, with improvement expected later

Industrial Policies Showing Mixed Results

The report also notes that South Asian countries are using industrial policies more actively than other regions.

• Import restrictions have reduced incoming goods.
• But efforts to increase exports have not shown strong results yet.