India’s economic momentum remains unmatched among major global economies, with the World Bank revising the country’s GDP growth forecast for FY26 to 6.5%, up from its earlier 6.3% estimate made in June.
According to the World Bank’s latest report released on Tuesday, the upgrade reflects resilient domestic demand, a robust rural recovery, improved agricultural output, and the positive effects of recent tax reforms. The report reaffirmed that India will continue to be the world’s fastest-growing major economy.
While India’s outlook brightened, growth trends across South Asia remained mixed. The World Bank pegged Bangladesh’s growth at 4.8%, while Bhutan’s projection was trimmed to 7.3% for FY26 due to hydropower construction delays. Growth is projected to rebound in Bhutan once projects accelerate in FY27.
In contrast, Sri Lanka’s forecast was upgraded to 3.5% for FY26, driven by a strong rebound in tourism and services. However, Maldives and Nepal are expected to face slower growth—3.9% and 2.1%, respectively—owing to weak demand and political instability.
Overall, South Asia’s regional growth is projected at 6.6% in 2025, moderating to 5.8% in 2026, a 0.6 percentage point downward revision from the April forecast. The report cautioned that risks such as the global economic slowdown, trade uncertainties, political unrest, and disruptions from emerging technologies like artificial intelligence (AI) could weigh on future growth.
“South Asia has enormous economic potential and is still the fastest growing region in the world,” said Johannes Zutt, World Bank Vice President for South Asia. “But countries need to proactively address risks to growth. They can boost productivity, spur private investment, and create jobs by maximizing the benefits of AI and lowering trade barriers, especially for intermediate goods.”
The World Bank emphasized that AI presents both challenges and opportunities for the region. While automation may displace some low- to mid-skilled jobs, it can also deliver significant productivity gains in sectors like IT and business services. Jobs demanding AI expertise are already commanding a 30% wage premium, indicating a rapid shift in labor market demand.
To sustain high growth, the report recommended reforms to ease business regulations, improve transport and digital infrastructure, enhance job-matching and upskilling programs, and strengthen social safety nets for workers affected by technological transitions.