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India Remains World’s Fastest-Growing Economy With 6.7% Growth Over Next Three Years: World Bank

1 month ago
India Remains World’s Fastest-Growing Economy

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The World Bank has maintained its growth forecast for India’s economy at 6.6 percent for the fiscal year 2025, citing the country’s strong economic fundamentals and resilient domestic demand.


Steady Growth Amidst Global Challenges

“India will remain the fastest-growing of the world’s largest economies, although its pace of expansion is expected to moderate. After a high growth rate in FY 2023/24, steady growth of 6.7 per cent per year, on average, is projected for the three fiscal years beginning in FY 2024/25,” the World Bank stated in its latest biannual Global Economic Prospects report.


Strong Industrial and Services Activity

Growth in industrial activity, including manufacturing and construction, has exceeded expectations, with resilient services activity offsetting a slowdown in agricultural production caused by monsoons.

Robust domestic demand, driven by a surge in investment particularly in infrastructure, has compensated for the moderation in consumption growth as post-pandemic pent-up demand eases.


Investment and Consumption Outlook

Despite a slowdown in investment from a high base, the World Bank expects investment growth to remain strong over the forecast period, driven by both public and private investment.

Private consumption growth is anticipated to benefit from a recovery in agricultural production and declining inflation, while government consumption is projected to grow slowly, aligning with the government’s goal of reducing current expenditure relative to GDP.


Future Projections

For FY26 and FY27, the World Bank forecasts India’s economy to grow at 6.7 percent and 6.8 percent, respectively. In FY24, the National Statistical Office estimated GDP growth at 8.2 percent. The Reserve Bank of India (RBI) recently adjusted its growth projection for FY25 to 7.2 percent from an earlier estimate of 7 percent.


RBI Governor Shaktikanta Das noted, “The forecast of above-normal south-west monsoon by the India Meteorological Department (IMD) is expected to boost kharif production and replenish the reservoir levels. Strengthening agricultural sector activity is expected to boost rural consumption. On the other hand, sustained buoyancy in services activity should continue to support urban consumption. The healthy balance sheets of banks and corporates; government’s continued thrust on capex; high capacity utilisation, and business optimism augur well for investment activity. External demand should get a fillip from improving prospects of global trade.”


Fiscal Deficit and Tax Revenues

The World Bank also projected that India’s fiscal deficit would shrink relative to GDP, partly due to increased revenues from efforts to broaden the tax base. 

“India’s economy has been buoyed by strong domestic demand, with a surge in investment, and robust services activity. Some large EMDEs, such as India, are expected to see continued solid per capita growth,” the report added.