India's Economy Surges: World Bank Projects 7.6% Growth for FY26

Growth is estimated at 7.6 per cent in fiscal year 2025-26, higher than earlier projections, reflecting the strength of consumption and investment activity, according to the South Asia Economic Update.

Private consumption has been a key driver. The report said retail demand has remained steady, supported by lower inflation, tax rationalisation and rising consumer confidence, which reached its highest post-pandemic level in late 2025.

Domestic demand has helped offset weakness in goods exports. Shipments of merchandise grew marginally, affected by tariff disruptions, but services exports remained strong, expanding by about 16 per cent in recent months.

The services sector continues to anchor growth. Information and communications technology and business services have expanded steadily, contributing to export earnings and economic activity.

Manufacturing has also picked up pace. The report noted that industrial activity has been strong, with manufacturing growing by more than 10 per cent annually between 2023 and 2025, led by sectors such as electronics.

According to the World Bank, government incentives and rising investment flows have supported this expansion. Production-linked incentive schemes and improved infrastructure have helped boost output and competitiveness, the report said.

India's trade outlook has improved with new free trade agreements with the European Union and the United Kingdom. These deals are expected to reduce tariffs on more than 95 per cent of traded goods and expand market access for Indian firms.

The World Bank said such reforms are likely to result in "broad-based consumption and real income gains" for households, especially through lower prices for manufactured goods.

Macroeconomic stability has reinforced growth. Inflation remained within the central bank's target range for much of 2025, aided by lower food prices. The Reserve Bank of India cut policy rates through the year, supporting consumption and investment.

India's financial system has remained stable, with well-capitalised banks and improving credit conditions supporting economic activity, the report said.

The World Bank also pointed to structural reforms as a key factor behind India's performance. Measures to improve infrastructure, streamline taxes and strengthen the financial sector have enhanced productivity and investor confidence.

While external risks such as higher energy prices persist, the report said India's strong domestic fundamentals and reform trajectory position it well to sustain growth.

India has consistently outperformed growth forecasts in recent years, reflecting resilience and steady policy support. Over the longer term, continued reforms and investment could further strengthen its economic trajectory.

- IANS