World Bank sees India growth at 6.6% in FY27, flags inflation risk from energy prices

The World Bank on Wednesday raised India’s GDP growth forecast to 6.6% for the current fiscal but warned that inflation could rise up due to strong demand, normalising food prices, and higher energy prices.
 
The latest forecast in its South Asia Economic Update of April 2026 raises India’s growth forecast for the current fiscal from its previous estimate of 6.3% in October. However, economic growth will be slower than the 7.6% estimated in FY26 due to the challenges from the West Asia conflict.
 
“Growth is projected to decelerate to 6.6% in FY27, reflecting headwinds from the Middle East conflict. The impact of these is highly uncertain: other forecasters have revised down their growth projections to a range between 5.9 and 6.7%,” the World Bank said. 
 
Earlier in the day, the Reserve Bank of India lowered India’s GDP growth forecast to 6.9% in FY27 due to concerns over elevated commodity prices and supply chain disruptions originating from the West Asia crisis.

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The World Bank in its report further noted that the reduction in rates of goods and services tax should continue to support consumer demand in the first half of FY27. But it warned that elevated global energy prices are expected to put upward pressure on prices and constrain households' disposable income.
 
“Government consumption growth is expected to soften to offset higher subsidy outlays for cooking fuel and fertilisers,” it said, adding that investment growth is likely to moderate amid elevated uncertainty and rising input costs.
 
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 further noted.
 
Growth in South Asia is expected to slow to 6.3% in 2026—from 7% in 2025—due to disruptions in global energy markets, the report said, adding that the region’s growth could be dampened in a variety of ways.

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“Persistently high energy prices could further increase production costs, erode real incomes, tighten financial conditions, and worsen current account imbalances,” it said, adding that a spate of global financial turbulence could be transmitted to the region and magnified by domestic vulnerabilities, such as high levels of nonperforming loans in some countries, high interest payment obligations, or elevated stock price valuations.
 
While India’s fiscal deficit had been shrinking in recent years, the report noted that this trend is expected to stall or reverse as a result of increased subsidy outlays resulting from efforts to limit inflation passthrough to consumers.