The World Bank has lowered India’s growth forecast for 2025-26 by 40 basis points to 6.3 per cent, over global economic weakness and policy uncertainty.
In India, growth is expected to slow from 6.5 per cent in 2024-25 to 6.3 per cent in 2025-26 as the benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty.For 2024-25, India’s growth forecast has been lowered by 50 basis points to 6.5 per cent.
RBI Joins Chorus of Caution as Global Risks Loom
The Reserve Bank of India also recently lowered the growth forecast for the current fiscal 2025-26 to 6.5 per cent from 6.7 per cent, amid uncertainties arising from trade wars following the reciprocal tariffs announced by the US.
“Amid increasing uncertainty in the global economy, South Asia’s growth prospects have weakened, with projections downgraded in most countries in the region,” the World Bank said in its latest “South Asia Development Update”.
South Asia Faces Fragile Recovery and Fiscal Challenges
Stepping up domestic revenue mobilisation could help the region strengthen fragile fiscal positions and increase resilience against future shocks, said the World Bank in its twice-yearly regional outlook.
World Bank projects regional growth to slow to 5.8 per cent in 2025–0.4 percentage points below October projections–before ticking up to 6.1 per cent in 2026.
This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities, including constrained fiscal space, the World Bank said.
“Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment,” said Martin Raiser, World Bank Vice President for South Asia. “The region needs targeted reforms to address vulnerabilities such as fragile fiscal positions, backward agricultural sectors, and the impact of climate-related shocks.”
In Bangladesh, growth is expected to slow in 2024-25 to 3.3 per cent amid political uncertainty and persistent financial challenges, and the growth rebound in 2025-26 has been downgraded to 4.9 per cent, down 60 basis points.
In Pakistan, the economy is expected to grow by 2.7 per cent in 2024-25 and 3.1 per cent in 2025-26.
In Sri Lanka, the government has made further progress with debt restructuring, and a projected rebound in investment and external demand is expected to lift growth in 2025 to 3.5 per cent before it returns to 3.1 per cent in 2026.
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