On Tuesday, the World Bank left India’s economic growth rate at 6.3 per cent for FY 2025-26, maintaining its position as the world’s fastest-growing economy.
The World Bank in its ‘Global Economic Prospects’ report said that in the following two fiscal years, beginning in FY2026/27, growth will rebound to 6.6 per cent a year, on average, partly aided by a strong services performance leading to an improvement in exports.
Nevertheless, the activity in construction and services continued to rise steadily, and the agricultural production returned to normal after experiencing the worst drought conditions, added the World Bank.
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Amid all this, the risks of increased trade tensions and policy uncertainty should lead this year to global growth, the lowest since 2008 except in the case of outright global recessions.
This crisis has led to downward revision of growth prospects in almost 70 per cent of all economies – in all regions and of all income levels.
The World Bank said global growth will decline to 2.3 per cent in 2025, which is almost half a percentage point slower than the pace that was anticipated at the beginning of the year.
It will not result in a worldwide recession. However, should projections over the next two years be realised, the first seven years of the 2020s will be the weakest in terms of average global growth since the 1960s, it said.
The developing world, excluding Asia, is turning into a development-free zone, said Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group, Development Economics.
It has been promoting itself for over 10 years. Developing economies have had their growth ratcheted downwards over the last 30 years, he says: “After 6 per cent a year in the 2000s, and 5 per cent in the 2010s, developing economies are set to grow at less than 4% in the 2020s.”
Global trade development has dropped from an average of 5% in the 2000s to around 4.5% in the 2010s, and has now fallen below 3% in the 2020s. Investment growth has stagnated, while debt has reached record levels.
The report stated that, due to rising trade barriers, developing economies must liberalise by building strategic trade and investment relationships and diversifying trade through regional agreements.
With limited government resources and rising development demands, the report proposed that policymakers focus on mobilising domestic revenues, prioritising fiscal spending for the poorest households, and consolidating fiscal structures.
