New Delhi, April 11 – Despite the global slowdown, India remains one of the fastest-growing major economies in the world, with an expected growth rate of 6.6% in FY27. This is primarily due to higher energy prices resulting from the Middle East conflict and disruptions in supply chains, which are weighing on economic activity.
According to the latest World Bank economic update, despite significant downside risks stemming from the conflict, the economy's strong macroeconomic fundamentals and policy buffers provide some insulation.
Substantial foreign reserves, low inflation, predominantly rupee-denominated public debt, a healthy financial sector, and efforts to diversify trade play a major role in providing resilience against external headwinds.
"Boosting private sector-led growth is critical to strengthening economic resilience and supporting more young people to enter the workforce," says Paul Procee, Acting Director for India at the World Bank.
To achieve Viksit Bharat (Developed India), a predictable and business-friendly environment will help unlock investment and create jobs at scale in priority sectors such as energy, infrastructure, manufacturing, tourism, healthcare, and agribusiness, Procee adds.
The latest South Asia Economic Update projects growth in South Asia to slow to 6.3% in 2026, from 7% in 2025, due to disruptions in global energy markets.
Despite the slowdown, South Asia continues to grow faster than other emerging and developing economies. Growth is expected to recover to 6.9% in 2027.
Global growth could be lowered by 0.3 to 0.4 percentage points in a baseline scenario, with an early end to the war, and by as much as 1 percentage point if it endures.
Global inflation could increase by 200 to 300 basis points, with a much higher impact – of up to 0.9 percentage point – if the war continues.
The World Bank report also includes an in-depth analysis of the region's use of industrial policy – the range of policy tools governments are using to shape what an economy produces, rather than leaving it to markets alone.
Governments around the world are increasingly using industrial policy, and in South Asia industrial policies are implemented at roughly twice the rate of other emerging economies. But these measures have delivered mixed results in South Asia, said the report.
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