By Anjali Sharma
WASHINGTON – The World Bank on Tuesday has raised its growth forecast for India for the financial year ending March 2027, cited resilience in the industrial and services sectors despite risks from a weaker monsoon and elevated energy prices.
The multilateral lender now expects India’s economy to grow 7.1% in FY27, an upward revision of 0.5 percentage point from its previous estimate.
The latest projection is also higher than the 6.7% growth forecast by the Reserve Bank of India.
The upgrade came after a series of more upbeat assessments of India’s economic outlook.
The RBI is also expected to revise its growth projection when it announces its monetary policy decision on Wednesday.
According to the World Bank’s latest South Asia Development Update, continued momentum in industry and services is expected to support economic activity even as India faces weather-related risks and higher energy costs.
The stronger forecast suggests that domestic economic activity could provide a buffer against external shocks, particularly those arising from elevated crude oil and other energy prices.
The World Bank’s assessment comes at a time when energy markets remain under pressure, with the fallout from the US-Iran conflict pushing up global prices.
In its separate East Asia & Pacific Economic Update, the World Bank warned that governments across the region could face increasing pressure if the energy shock persists into 2027.
Countries in East Asia and the Pacific have relied heavily on subsidies and other measures to limit the impact of higher fuel prices on consumers. However, the World Bank cautioned that such policies could become difficult to sustain if energy prices remain elevated for an extended period.
The bank expects Middle Eastern oil exports to remain below pre-conflict levels until mid-2027.
A prolonged disruption could force governments to continue spending on energy support, while also delaying adjustments in consumer and business behaviour.
The World Bank said such interventions could increase fiscal pressure and reduce foreign-exchange reserves.
The World Bank highlighted Indonesia, Thailand and Vietnam as examples of economies that have intervened to contain domestic gasoline prices.
The three countries have taken steps to shield consumers from higher fuel costs, but their foreign-exchange reserves have come under pressure. Their dollar reserves have declined by around 15% to 40% this year, according to the bank.
The World Bank warned that prolonged subsidies could leave governments with less policy room to respond to future economic shocks.
Despite the energy-related risks, the World Bank said the region is currently benefiting from what it described as “AI tailwinds”.
The bank has raised its growth forecast for East Asia and the Pacific to 4.5% for this year, up 0.3 percentage point from its previous projection. Strong investment and exports linked to the artificial intelligence boom are among the key factors supporting the regional outlook.
The growth forecast for next year has been maintained at 4.4%.
It cautioned that the region’s resilience could weaken if the energy shock lasts longer than expected and coincides with a slowdown in AI-related investment and demand.
Weather disruptions linked to El Niño could add another layer of risk.
Higher energy costs are already affecting manufacturing activity, while rising transportation costs are putting pressure on household consumption.
A combination of persistent energy inflation, weaker AI demand and adverse weather could therefore make the regional outlook more challenging.
