India’s economy is projected to grow 7.1% in FY27, supported by robust domestic demand and strong exports despite global headwinds, according to the World Bank’s latest economic update. The World Bank’s October South Asia Economic Update raised its India growth forecast for FY27 from 6.6% to 7.1%, while projecting growth of 7.2% in FY28. India’s economy expanded 7.8% in FY26, slightly above the World Bank’s earlier estimate.
According to the global agency, strong domestic demand and continued momentum in industry and services are expected to support India’s longer-term growth potential. Other factors include labour code consolidation, GST reforms, tariff rationalisation, the Insolvency Act, and investment in physical and digital infrastructure.
The report said South Asia is projected to grow 6.9% in 2026 and 6.7% in 2027, while growth excluding India is projected at just 3.6% and 3.8%, respectively.
The India Development Update, released on Tuesday, said India’s medium-term prospects are strong but cautioned that external risks remain elevated. These include downside risks from global oil prices, El Niño and stock market corrections that could result in capital flow volatility.
The update’s special focus — “India and Artificial Intelligence: Seizing the Development Opportunity” — highlights that India is well positioned to harness AI, thanks to its large technical workforce, globally integrated IT sector and digital public infrastructure.
Private AI investment tripled from $1.2 billion in 2024 to $4.1 billion in 2025. At the same time, Global Capability Centres employed 1.9 million professionals in 2024, with the number rising to 2.36 million in 2025.
The report acknowledged that the long-term economic and labour market impacts of AI remain uncertain. It called for cross-cutting policy measures to deepen AI-enabling infrastructure and improve the business environment, while broadening access to AI and enhancing labour capacity so that its benefits are broadly shared.
For most of the region, the greatest gains from AI will come from adopting the technology and adapting it to local conditions, including through small AI applications suited to low-resource settings, the report said.
This will also depend on complementary measures to reduce barriers to AI adoption by small firms, foster local AI innovation and establish a clear regulatory framework that reduces uncertainty while safeguarding data security and privacy.
