World Bank Cuts India's 2025-26 Growth Forecast to 6.3% Amid Global Trade Strains
The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s
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India's economic growth forecast for 2025-26 has been revised downward by the World Bank to 6.3 per cent, a reduction from its earlier projection of 6.7 per cent in January, as weakening global demand and rising trade barriers weigh on exports. Despite the downgrade, India is still expected to remain the fastest-growing major economy, according to the Bank's latest Global Economic Prospects report released Tuesday.
The revised outlook reflects growing concerns about global economic headwinds. "India is projected to maintain the fastest growth rate among the world's largest economies, at 6.3 per cent in FY25-26," the report said. However, it noted that exports are dampened by weaker activity in key trading partners and rising global trade barriers, leading to the downgrade.
The broader context is one of global slowdown. The report projects global GDP growth to decelerate to 2.3 per cent in 2025, the slowest pace since 2008 outside of formal recessions. Heightened trade tensions and policy uncertainty are expected to drive global growth down this year. Growth forecasts have been cut for nearly 70 per cent of countries, spanning all regions and income levels.
In South Asia, growth is already showing signs of fatigue. Following a lower-than-expected 6 per cent growth in 2024, the region's economy is forecast to slow to 5.8 per cent in 2025, with trade barriers, investor unease, and financial volatility dampening momentum. The World Bank noted that activity in South Asia is decelerating amid rising global trade barriers, heightened policy uncertainty, and financial market volatility.
India's current economic performance has been uneven. While construction and services remained steady, and agricultural output rebounded after droughts, industrial output growth has slowed. Investment growth is also projected to weaken in the coming fiscal year, driven in part by surging global policy uncertainty.
Still, the medium-term outlook remains cautiously optimistic. Growth is expected to recover to 6.6 per cent in FY26-27 and FY2027-28, helped by a strong services sector and a potential rebound in exports. However, the projection for FY26-27 has also been revised slightly downward to 6.5 per cent, 0.2 percentage point below earlier estimates.
The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s. To counter the drag from rising trade frictions, it advises developing nations to diversify trade relationships and strengthen fiscal policies focused on vulnerable populations.
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