World Bank Retains India’s FY26 GDP Growth at 6.3%, Flags Global Slowdown

The World Bank has retained its GDP growth forecast for India at 6.3% for the financial year 2025–26, reaffirming the country’s position as the fastest-growing large economy. Despite a global economic slowdown driven by policy uncertainty and trade tensions, India continues to show resilience, supported by robust services and moderating inflation. The outlook comes amid recent monetary policy easing by the Reserve Bank of India (RBI) and projected fiscal consolidation in the medium term.

Why in News?

On June 10, 2025, the World Bank released its Global Economic Prospects report, maintaining India’s FY26 GDP forecast at 6.3%. This forecast comes despite a cut in global growth projections for 70% of economies due to trade tensions, weak investment, and slow export activity. India remains a bright spot in the global economy, especially as major economies face deceleration in growth.

Global Economic Outlook

• Global GDP growth for 2025 is now forecasted at 2.3% – the slowest pace since 2008, excluding recession years.

Growth for 70% of world economies has been downgraded due to,

• Heightened trade tensions.
• U.S.-China export control disputes.
• Surge in global policy uncertainty.

India’s Growth Projections

• FY26 forecast retained at 6.3% (down from January’s 6.7% projection).
• FY27 projection cut by 20 bps to 6.5%.
• FY28 forecast raised to 6.7%, supported by strong services and export recovery.
• Despite a slight moderation, India will remain the world’s fastest-growing major economy.

Drivers Behind Forecast Moderation

• Weaker exports due to slowing demand in key trade partners.
• Rising global trade barriers affecting outbound shipments.
• Investment growth expected to slow amid uncertainty in global policy environments.

Domestic Economic Conditions

• RBI has cut the repo rate by 100 bps in 2025, now at 5.50%, to stimulate growth.
• Inflation expected to average 3.7% in FY26, allowing for policy easing.
• RBI maintains 6.5% growth forecast, while the government projects 6.3–6.8%.
• FY25 GDP growth slowed to 6.5%, the lowest in four years.

Fiscal Outlook

• The Indian government will target a debt-to-GDP ratio of 49–51% by FY31.
• Current public debt stands at 56.1% of GDP (FY26 estimate).

Fiscal consolidation expected through,

• Growing tax revenues.
• Declining current expenditures.