World Bank raises India's FY27 GDP growth projections to 6.6%; flags Middle East risks

NewNew Delhi: The World Bank has marginally raised India's growth projections for 2026-27 fiscal to 6.6 percent and said that although GST rate cuts would boost consumer demands in the initial months of the fiscal, headwinds arising from the Middle East crisis could dent growth.

The FY27 projection compares with estimates of 6.9 percent by the RBI, 6.1 percent by the OECD, and 6 percent by Moody’s Ratings.

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In its South Asia Economic Update report released on Wednesday, the World Bank said India's growth is estimated to have accelerated from 7.1 percent in FY25 to 7.6 percent in FY26 (April 2025-March 2026), owing to strong domestic demand and export resilience.

Private consumption growth was particularly robust, supported by low inflation and rationalisation of the Goods and Services Tax (GST).

"Growth is projected to decelerate to 6.6 percent in FY27, reflecting headwinds from the Middle East conflict," it said.

Although the reduction in GST rates should continue to support consumer demand in the first half of FY27, elevated global energy prices are expected to put upward pressure on prices and constrain households' disposable income, it said.

Government consumption growth is expected to soften to set higher subsidy outlays for cooking fuel and fertilizers. Investment growth is likely to moderate amid elevated uncertainty and rising input costs, the World Bank said.

Improved access to the United States and the European Union for India's exports will be undermined by slower growth in major trading partners, it added.

The World Bank in its Global Economic Prospects report in January had projected India to grow 6.5 percent in 2026-27.

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The World Bank said the impact of the Middle East crisis is highly uncertain and other forecasters have revised down their growth projections to a range between 5.9 and 6.7 percent for FY27.

On February 28, the United States and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran.

On April 8, Iran, the United States and Israel agreed on a two-week ceasefire in the war that tore across the Middle East and disrupted the global energy market.

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