India estimated to face slower growth, yet leads developing economies

Shrankhla Verma | June 11, 2025

India’s economy is expected to grow at a slower pace in the coming years, but it remains the fastest among major economies, according to the World Bank’s June 2025 Global Economic Prospects report. Weighed down by weaker exports and rising global trade barriers, India’s GDP growth forecast for FY26 has been trimmed to 6.3%, though strong domestic demand and investment continue to drive momentum.

India’s economy is expected to continue leading global growth, despite the World Bank lowering its projections in its latest Global Economic Prospects report, released in June 2025. The multilateral lender now estimates India’s GDP will grow by 6.3% in FY2025–26, down from its earlier projection of 6.7% made in January. Growth for FY2026–27 has also been revised downward by 0.2 percentage points to 6.5%.

The revision comes amid a weaker outlook for global trade and growing uncertainty in investment trends. The World Bank pointed to reduced export demand from key trading partners and the rise of global trade restrictions as major factors contributing to India’s downgraded forecast. Rising geopolitical tensions and tighter financial conditions globally have added to the uncertainty, discouraging private investment and dampening tax revenues.

Despite these challenges, India’s economic fundamentals remain relatively strong. Recent government data shows that the country’s GDP expanded by 6.5% in FY2024–25. Meanwhile, the Reserve Bank of India (RBI) has maintained its growth forecast of 6.5% for the current fiscal year, supporting economic activity with a sharper-than-expected cut in interest rates to boost investment and demand.

While India continues to show resilience, the global outlook is turning gloomier. The World Bank has reduced its global growth forecast for 2025 to 2.3%, down from 2.7% in its January report. This would mark the slowest pace of global expansion since 2008, excluding recessions. The U.S. growth estimate has also been cut significantly to 1.4%, while China’s growth outlook remains steady at 4.5%.

In the broader South Asian context, the region is also projected to experience a slowdown. The World Bank forecasts growth of 5.8% in 2025, slightly lower than the 6% expected for 2024. Rising trade restrictions, weaker business confidence, and slowing investments are all contributing to the regional deceleration. However, growth is expected to pick up again by 2026–27, averaging around 6.2% annually—largely driven by stronger economic performance in India and its neighbours.

The report also highlights how developing and emerging economies, which once benefited from trade integration, now find themselves vulnerable to the growing fragmentation in global trade. India, however, remains a standout performer, with its domestic consumption, infrastructure investment, and robust service and manufacturing activity acting as key pillars of support.

On the social development front, the World Bank’s latest poverty data shows significant progress. Between 2011–12 and 2022–23, nearly 270 million people in India were lifted out of extreme poverty. Across South Asia, per capita income is expected to grow at an average rate of 5% over 2025–27, further supporting poverty reduction efforts. Excluding India, the region’s per capita income growth is projected to rise from 2.1% in 2025 to 3% in 2027.

India estimated to face slower growth, yet leads developing economies

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India estimated to face slower growth, yet leads developing economies

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