World Bank lowers India's growth forecast by 0.4 points to 6.3% for FY26 amid global uncertainty after IMF's cut

The World Bank cut its economic growth forecast for India on Wednesday, April 23, citing increased uncertainty in the global economy that will dim prospects for most South Asian nations. The World Bank lowered its forecast for India by 0.4 percentage points to 6.3 per cent for the fiscal year starting on April 1 (FY26), down from its previous forecast in October 2024.

"Benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty," the World Bank said in its economic report on South Asia.

World Bank follows IMF's cut for India's FY26 growth

It cut its growth forecasts for most South Asian nations, citing “limited buffers to withstand global challenges.” Earlier this week, the International Monetary Fund (IMF) also cut its economic growth forecast for India for the current fiscal year, citing increased trade tensions and global uncertainty.

The IMF lowered its forecast to 6.2 per cent from 6.5 per cent it had forecast for FY26 in January. The World Bank and the IMF's revised forecasts are marginally below the Reserve Bank of India (RBI)'s 6.5 per cent growth estimate.

The IMF said India's growth outlook is relatively more stable at 6.2 per cent in 2025 (2025–26), supported by private consumption, particularly in rural areas. Still, this rate is 0.3 percentage points lower than that in the January 2025 World Economic Outlook update because of higher trade tensions and global uncertainty.

The IMF expects India to grow at 6.3 per cent in FY27. The IMF presents India's economic data and predictions on a fiscal year basis, using the calendar year for other economies. The multilateral agency expects global trade to grow at 1.7 per cent in 2025, down from 3.8 per cent in the previous year.

US tariffs to shave up to half a percentage point off India GDP

The direct hit from tariffs introduced by Donald Trump's administration on India could shave off between 0.2-0.5 percentage points from the GDP growth, the country's Finance Secretary Ajay Seth said on Wednesday.

"Now there is a sign of that...we grow about 6.5 per cent in the current year," said Ajay Seth, speaking at a Hudson Institute event on the sidelines of the Spring Meetings of the IMF and the World Bank in Washington.

"Second order (effects) would be important," said Seth, referring to concerns that trade turmoil would slow global growth. He expected that a potential growth rate of seven per cent could be achieved over the next decade, though India needed to expand its economy faster than that to achieve its ambitious longer-term targets.