The World Bank has revised India’s growth forecast for 2025-26 downward by 40 basis points to 6.3%, noting that while monetary easing and regulatory reforms may boost private investment, these gains could be undermined by global economic challenges and policy unpredictability.

Similarly, the International Monetary Fund (IMF) lowered its growth estimate for India by 30 basis points to 6.2% for FY26, pointing to rising trade tensions and increasing global uncertainty as key concerns.

The World Bank also reduced India’s growth forecast for FY25 by 50 basis points to 6.5%, attributing the downgrade to weaker-than-expected growth in private investment and public capital spending falling short of government targets.

“GDP growth is expected to slow from 6.5% in FY24/25 to 6.3% in FY25/26,” according to the bank’s South Asia Development Update.

“The benefits to private investment from monetary easing and regulatory streamlining are expected to be offset by global economic weakness and policy uncertainty,” it added.

Private consumption is projected to receive a boost from recent tax cuts, while improved execution of public investment plans is expected to enhance government spending. However, export demand may remain subdued due to changing trade policies and a slowdown in global growth, The Financial Express reports.

Furthermore, the IMF warned on Tuesday that the “near-universal” tariffs imposed by the US constitute a significant shock to global economic growth. As a result, the IMF lowered its global output growth forecast for this year to 2.8%, down from 3.3% projected in January.

If realised, this would mark the slowest pace of global GDP expansion since the Covid-19 pandemic in 2020.

Moreover, the World Bank noted that India’s economy showed unexpected weakness in mid-2024 but recovered momentum by year-end. Manufacturing growth remained sluggish, and public investment growth did not meet budget expectations. However, consumption picked up pace, driven by strong employment gains and rising real wages, especially in rural regions.

A decline in food price inflation brought headline inflation down to 3.6% in February this year, positioning it near the midpoint of the Reserve Bank of India’s target range of 2–6%. This marks a significant drop from the recent peak of 6.2% recorded in October 2024.