The World Bank, in its latest Global Economic Prospects report released Thursday, maintained its forecast for India’s economic growth at 6.7 per cent for FY26, underscoring the nation’s resilience amid global challenges. India is poised to remain the fastest-growing major economy for the next two years, driven by robust services and manufacturing sectors.

“India’s services sector is expected to enjoy sustained expansion, while manufacturing activity is set to strengthen, bolstered by government efforts to enhance logistics infrastructure and streamline the business environment through tax reforms,” the report noted.

Globally, economic growth is projected to stabilize at 2.7 per cent for 2025 and 2026, mirroring 2024 levels, as inflation and interest rates ease. Developing economies are expected to grow at about 4 per cent annually during the same period, though long-term challenges loom large.

“The next 25 years will be tougher for developing economies,” warned Indermit Gill, the World Bank’s chief economist. He highlighted key hurdles such as high debt, weak investment, sluggish productivity, and rising climate costs, urging nations to adopt reforms that attract private investment, deepen trade ties, and improve resource efficiency.

For India, private consumption remains a growth driver, supported by a strengthening labor market, expanding credit access, and declining inflation. However, government spending growth may stay restrained, the Bank said. Investment growth is expected to remain steady, fueled by healthier corporate balance sheets and improved financing conditions.

Despite these positives, India’s growth is projected to decelerate to 6.5 per cent in FY25 from 8.2 per cent in FY24, reflecting weaker manufacturing growth and a slowdown in investment. Nonetheless, agricultural recovery and resilient private consumption, particularly in rural areas, offer support.

The report also flagged fiscal tightening in India and other South Asian countries. “Fiscal deficits are expected to shrink, aided by growing tax revenues,” it stated. However, risks from global trade policies and protectionism in major economies like the U.S. and Europe could impact manufacturing exports from South Asia, including India.

Other regional risks include higher commodity prices, potential social unrest, and climate-related disasters. The Bank urged policymakers to prioritize domestic reforms and adapt to shifting global economic dynamics.

As global uncertainties persist, India’s economic performance will remain critical, not only for South Asia but for the broader global economy.