NEW DELHI, April 9, 2026 - Growth in India is projected at 6.6% in FY27, as higher energy prices caused by the Middle East conflict and supply chain disruptions weigh on economic activity. But even with the slowdown, India remains among the fastest-growing major economies in the world, says the World Bank's latest economic update.
Released today, the India Development Update says that despite significant downside risks stemming from the conflict, the economy's strong macroeconomic fundamentals and policy buffers offer some insulation. Substantial foreign reserves, low inflation, predominantly rupee-denominated public debt, a healthy financial sector, and trade diversification efforts play a major role in providing resilience from external headwinds.
"Boosting private sector-led growth will be critical to strengthening economic resilience and supporting more young people to enter the workforce," said Paul Procee, World Bank Acting Director for India. "To achieve Viksit Bharat, a predictable, business-enabling environment will help to unlock investment and create jobs at scale in priority sectors like energy and infrastructure, manufacturing, tourism, healthcare, and agribusiness."
The India Development Update is a companion piece to the World Bank Group's South Asia Economic Update, which examines economic developments and prospects in the South Asia region. The latest South Asia Economic Update, Working with Industrial Policy, projects growth in South Asia to slow to 6.3% in 2026-from 7% in 2025-due to disruptions in global energy markets. Despite the slowdown, South Asia continues to grow faster than other emerging markets and developing economies. Growth is expected to recover to 6.9% in 2027.
The regional report also includes an in-depth analysis of the region's use of industrial policy-the range of policy tools governments are using to shape what an economy produces, rather than leaving it to markets alone. Governments around the world are increasingly using industrial policy, and in South Asia industrial policies are implemented at roughly twice the rate of other emerging economies. But these measures have delivered mixed results in South Asia.
"South Asia's mixed success on industrial policy in part reflects the region's limited implementation capacity, fiscal space, and market size in some countries," said Franziska Ohnsorge, World Bank Group Chief Economist for South Asia. "While broad-based reforms remain the priority, well-calibrated industrial policies could address specific market failures, including through measures such as industrial parks, skill development programs, market access assistance, and improving export quality standards."
The South Asia Economic Update recommends implementing carefully designed policy measures in sectors such as urban development, tourism and digital services, alongside broad-based improvements in the underlying business environment, regulatory predictability, and state capacity-all of which are critical for job creation.
