By Anjali Sharma
WASHINGTON – The World Bank on Tuesday raised India’s gross domestic product forecast for 2025–26 (FY26) to 6.5 per cent from 6.3 per cent projected in June.
It revised downwards the estimate for 2026–27 (FY27) by 20 basis points to 6.3 per cent due to higher-than-expected tariffs on India’s exports to the United States.
World Bank South Asia Outlook, it said India is expected to remain the world’s fastest-growing major economy, supported by continued strength in consumption growth.
The report noted that almost one-fifth of India’s goods exports went to the United States in 2024, equivalent to about 2 per cent of GDP.
The government’s reforms to the Goods and Services Tax (GST), reducing the number of tax brackets and simplifying compliance, are expected to support activity.
The report added that forecast for FY26/27 has been downgraded as a result of the imposition of a 50 per cent tariff on about three-quarters of India’s goods exports to the United States.
“India is expected to be the world’s fastest-growing source of energy demand in the medium term and will surpass China to become the single largest source of energy demand by 2050.”
Morgan Stanley said India’s economy needs to expand at an extraordinary 12.2 per cent pace each year to solve its underemployment crisis.
It underscored the risk that millions of young Indians may remain locked out of productive work, fueling social strains at home.
India’s economy grew 7.8 per cent in the June quarter, outpacing expectations, but that pace still falls far short of what’s needed to absorb the 84 million people set to join the workforce over the next decade, Morgan Stanley said.
The report also pointed to poverty levels as a lingering drag on household consumption in the country.
Morgan Stanley warned that without stronger industrial and export growth, accelerated infrastructure rollout, and sweeping reforms to upgrade skills and improve the business climate, India risks falling into a jobs trap.
