Context:
The World Bank, in its Global Economic Prospects Report (June 2025), retained India’s FY26 GDP growth forecast at 6.3%, while projecting a gradual decline in the public debt-to-GDP ratio due to higher tax revenues and lower current expenditures.
Key Highlights:
India’s Growth Outlook:
- FY26 GDP growth forecast: Retained at 6.3%.
- Despite global headwinds, India is set to maintain the fastest growth among large global economies.
- Growth moderation in FY25 attributed to slower industrial output, but rebound expected from FY27 onwards, averaging 6.6% annually.
- Services sector and export recovery are seen as key drivers of medium-term growth.
Fiscal Outlook and Debt Management:
- The World Bank noted India’s shift from a fiscal deficit target to a debt-to-GDP anchor.
- The government targets bringing debt-to-GDP down to 50% by FY31, allowing for a ±1% deviation.
- Fiscal consolidation will be aided by:
- Higher tax revenues
- Falling current expenditures
Regional & Global Trends:
- India’s import demand will support trade across the South Asia region.
- Global growth in 2025 is projected at 2.3%, the weakest in 17 years excluding recessions.
- Trade tensions, policy uncertainty, and geopolitical risks pose downside risks.
- The report encourages developing countries to:
- Diversify trade
- Enter regional trade agreements
- Pursue strategic investment partnerships
Comparison of FY26 GDP Forecasts (India):
| Agency | Previous | Current |
|---|---|---|
| ADB | 7.0% | 6.7% |
| Moody’s* | 5.5–6.6% | 6.5% |
| Fitch | 6.5% | 6.4% |
| World Bank | 6.3% | 6.3% |
| IMF | 6.5% | 6.2% |
| UBS | 6.3% | 6.0% |
