World Bank sees India growing at 6.7% in next two fiscal years

The Indian economy will grow at a steady 6.7% in the next two fiscal years, despite growth slowing down to 6.5% in the current financial year, the World Bank said in a report.

In India, growth is expected to slow to 6.5% in the current fiscal year from 8.2% in FY24 on “a slowdown in investment and weak manufacturing growth, the World Bank said in its Global Economic Prospects report, adding that services activity has been steady, while growth in the agricultural sector has recovered.

The World Bank’s forecast for the current fiscal is higher than the first advance estimates released by the government that showed GDP growth at 6.4%.

Private consumption growth has remained resilient, primarily driven by improved rural incomes accompanied by a recovery of agricultural output. In contrast, higher inflation and slower credit growth have curbed consumption in urban areas, it said.

“The services sector is expected to enjoy sustained expansion, and manufacturing activity will strengthen, supported by government initiatives to improve the business environment. Investment growth is projected to be steady, with moderating public investment offset by rising private investment,” the multilateral lender said.

Growth in South Asia is estimated to have edged down to 6% in 2024 from 6.6% in 2023, as growth in India stabilizes from a high base.

Excluding India, growth in the region is estimated to have picked up to 3.9% last year from 3% in 2023, mainly reflecting recoveries in Pakistan and Sri Lanka, supported by improved macroeconomic policies aimed at addressing earlier economic difficulties, the report said.

“Growth in the region, excluding India, is set to strengthen to 4% in 2025 and to 4.3% in 2026, though the forecast for this year is slightly lower than in June mainly due to a downgrade for Bangladesh amid economic and policy uncertainty,” the World Bank said.

In India, inflation has stayed within the central bank’s target range since September 2023 except a breach in October 2024, driven by soaring food prices. Excluding India, regional inflation has been on a declining path, and headline inflation is within or below target ranges in most countries, including Nepal and Sri Lanka, it added.