Strong industry and services momentum lifts India’s outlook, but World Bank flags risks from oil prices, El Niño, market corrections and capital flows
The World Bank has raised its forecast for India’s economic growth in FY27 by 50 basis points to 7.1 per cent, citing strong momentum in industry and services.
In its latest South Asia Economic Update, the multilateral lender said India’s medium-term growth prospects remain strong, supported by structural reforms, infrastructure investment and a growing digital economy.
However, it warned that growth could moderate in the second half of FY27. External risks remain elevated, including higher global oil prices, El Niño-related disruptions and potential stock market corrections that could trigger volatility in capital flows.
The World Bank expects India’s economy to grow 7.2 per cent in FY28.
The upgrade follows stronger-than-expected economic activity, including 7.8 per cent GDP growth in the April-June quarter. Several global agencies, including S&P Global Ratings, Fitch Ratings, the OECD and Asian Development Bank, have also recently raised their India growth forecasts.
The World Bank said reforms such as GST changes, labour-code consolidation, tariff rationalisation, the Insolvency and Bankruptcy Code, and investments in physical and digital infrastructure should support India’s growth potential.
AI adoption remains a challenge
The report also highlighted India’s growing AI opportunity but warned that adoption remains uneven. Only 23 per cent of Indian firms report using AI, compared with 43 per cent in the US.
More from BusinessIndia’s AI Adoption Index stands at 0.27, against 0.85 for the US. The World Bank said nearly 75 per cent of Indian firms expect little or no productivity benefit from AI, highlighting the need for stronger skills, infrastructure and wider adoption.
The report also warned that South Asia’s demographic dividend is fading, increasing the urgency of job creation, workforce skilling and stronger social security systems.
