New Delhi, April 8 The World Bank on Wednesday slightly raised India's growth projections for the 2026-27 fiscal year to 6.6 per cent, stating that while cuts in the Goods and Services Tax (GST) rate would boost consumer demand in the initial months of the fiscal, the Middle East crisis could dampen growth.
The FY'27 projection compares with 6.9 per cent estimated by the Reserve Bank of India (RBI), 6.1 per cent by the OECD, and 6 per cent by Moody's Ratings.
In its South Asia Economic Update report, the World Bank said that India's growth is estimated to have accelerated from 7.1 per cent in FY'25 to 7.6 per cent in FY'26 (April 2025 to March 2026), driven by strong domestic demand and resilient exports.
Private consumption growth is particularly robust, supported by low inflation and the rationalization of the Goods and Services Tax (GST).
"Growth is projected to decelerate to 6.6 per cent in FY27, reflecting headwinds from the Middle East conflict," the World Bank said.
Although the reduction in GST rates should continue to support consumer demand in the first half of FY'27, elevated global energy prices are expected to put upward pressure on prices and constrain household disposable income, it added.
Government consumption growth is expected to soften due to higher subsidy outlays for cooking fuel and fertilizers. Investment growth is likely to moderate amid elevated uncertainty and rising input costs, the World Bank said.
Improved access to the United States and the European Union (EU) for India's exports will be undermined by slower growth in major trading partners, it added.
The World Bank, in its Global Economic Prospects report in January, had projected India to grow at a rate of 6.5 per cent in 2026-27.
The World Bank said the impact of the Middle East crisis is highly uncertain, and other forecasters have revised down their growth projections to a range between 5.9 and 6.7 per cent for FY'27.
On February 28, the US and Israel launched military strikes against Iran, triggering a sweeping retaliation from Tehran.
On April 8, Iran, the US, and Israel agreed on a two-week ceasefire in the war that tore across the Middle East and disrupted the global energy market.