World Bank, in its recent report, has highlighted India’s resilience as the fastest-growing economy in the world. The forecast for FY25 has been revised from 6.4% to 6.6%, and the estimated growth rate for FY26 has been increased by 20 basis points to 6.7%. This revision, influenced by the recently declared election results, underscores the significant role of political dynamics in shaping economic forecasts.
According to the World Bank, India will benefit from declining inflation and an increase in agricultural production. In their own words, “Investment growth is still expected to be stronger than previously envisaged and remain robust over the forecast period, with strong public investment accompanied by private investment.” The World Bank further mentioned that “Growth in industrial activity, including manufacturing and construction, was stronger than expected, alongside resilient services activity, which helped offset a slowdown in agricultural production partly caused by monsoons.”
However, the World Bank’s growth forecast is relatively lower than that of the International Monetary Fund (IMF) and RBI. IMF predicted the growth rate for the Indian economy to be around 6.8%, whereas RBI predicted it to be around 7% for the current fiscal year.
The World Bank also highlights India’s improving fiscal deficit and inflation conditions. As per RBI, inflation is expected to be 4.5% in FY25. According to experts, inflation is already at an 11-month low of 4.83% in April and is expected to decline further in May. They also mentioned, “In India, the fiscal deficit is projected to shrink relative to GDP, partly because of increased revenues generated by the authorities’ efforts to broaden the tax base.”
