India's fast-moving economy is likely to lose a little of its pace in the financial year 2026-27. A fresh assessment projects that the country's economic growth rate could slip to 6.6 percent during this period, compared with 7.7 percent recorded last year. Notably, even with this dip, India will hold on to its position as the world's fastest-growing major economy. The World Bank put forward this estimate on Thursday. In its report titled 'Global Economic Prospects', the institution said India's growth could soften to 6.6 percent in FY 2026-27. According to the report, weaker private demand — driven by high energy prices and the rising cost of other raw materials — is seen as the main reason behind this slowdown.
Country to Regain 7.2 Percent Pace in FY 2027-28
The report also points out that the reduction in Goods and Services Tax (GST) rates could offer some relief to consumer demand. The World Bank believes the country's economy will once again achieve a growth rate of 7.2 percent in FY 2027-28. The report notes that even amid the uncertainty linked to tensions in West Asia, India's economic activity stayed robust at the start of this year, supported strongly by domestic demand. Private consumption has remained firm, particularly in rural areas, while demand in urban regions is also steadily improving.
Tax Collection Rises on Stronger Domestic Sales
According to the World Bank report, tax collection has also seen a continuous increase on the back of domestic sales. At the same time, several measures — including a cut in fuel tax — have been taken to ease the price pressure stemming from high energy costs and shortages of agricultural products, especially fertiliser. The report stated that the expected reduction in US tariffs and the implementation of a Free Trade Agreement (FTA) could help cushion the impact of tensions on external demand, particularly exports.
South Asia Region's Growth Seen Falling to 6.3 Percent
The report says that, backed by strong domestic demand and a pickup in export growth, the country's growth rate is expected to rise again over the next two financial years. For the South Asian region as a whole, however, growth is projected to decline to 6.3 percent in 2026. The biggest reason cited for this is the ongoing conflict in West Asia, which brings with it rising energy prices, reduced supply of oil and natural gas, a drop in money sent home by people working abroad, and disruptions to tourism.
