World Bank ups FY26 growth outlook to 6.5% on but downgrades next year’s forecast due to Trump tariffs

The World Bank has upgraded its growth outlook for India to 6.5% in 2025-26, from the earlier 6.3%, citing stronger domestic conditions and also the impact of the GST rate cuts. However, it has revised downward its forecast for 2026-27 to 6.3%, saying the impact of the US tariffs will dampen growth.

In its South Asia Development Update released on Tuesday (October 7, 2025), the World Bank said India’s real GDP growth “exceeded expectations” in the April-June 2025 quarter, accelerating to 7.8%. It noted that growth was bolstered by strong private consumption and investment and boosted by lower-than-expected prices. 

For the current financial year, the World Bank said India’s growth has been revised upwards to 6.5% from the earlier prediction of 6.3%. 

“India is expected to remain the world’s fastest growing major economy, underpinned by continued strength in consumption growth,” the report said. “Domestic conditions, particularly agricultural output and rural wage growth, have been better than expected.” 

“The government’s reforms to the Goods and Services Tax (GST)— reducing the number of tax brackets and simplifying compliance— are expected to support activity,” it added. 

However, it said that the forecast for 2026-27 has been downgraded from 6.5% to 6.3% as a result of the imposition of the 50% tariff on about three-quarters of India’s goods exports to the US. 

“India had been expected to face lower U.S. tariffs than its competitors in April but as of the end of August it faces considerably higher tariffs,” the report noted. “Almost one-fifth of India’s goods exports went to the United States in 2024, equivalent to about 2% of GDP.”