India’s Economic Growth to Remain Steady at 6.7% in Next Two Fiscal Years: World Bank

India’s economic growth is projected to remain steady at 6.7% per annum for the next two fiscal years beginning April 2025, according to the World Bank’s latest growth estimates for South Asia.

“The services sector is expected to enjoy sustained expansion, and manufacturing activity will strengthen, supported by government initiatives to improve the business environment. Investment growth is projected to be steady, with moderating public investment offset by rising private investment,” the report stated.

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However, in fiscal year 2024-25 (April 2024 to March 2025), growth is expected to soften to 6.5%, reflecting a slowdown in investment and weaker manufacturing growth. “Private consumption growth has remained resilient, primarily driven by improved rural incomes accompanied by a recovery in agricultural output,” the report noted.

South Asia’s Growth Trends

Growth in the South Asian region (SAR) is estimated to have slowed to 6% in 2024, mainly due to stabilizing growth in India from a high base. However, excluding India, growth in SAR picked up to 3.9% in 2024, driven by recoveries in Pakistan and Sri Lanka, supported by improved macroeconomic policies addressing past economic challenges.

For 2025 and 2026, the region’s growth (excluding India) is expected to rise to 4% and 4.3%, respectively. However, the 2025 projection is slightly lower than earlier estimates due to a downgrade for Bangladesh, amid economic and policy uncertainty.

Challenges for Bangladesh’s Growth

In Bangladesh, political turmoil in mid-2024 led to weakened industrial activity, deteriorated investor confidence, and increased price pressures due to supply constraints, including energy shortages and import restrictions. Growth is forecast to decline to 4.1% in FY2024-25 (July 2024 to June 2025) before recovering to 5.4% in FY2025-26.

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Meanwhile, Pakistan and Sri Lanka have returned to positive growth following periods of economic contraction. In Pakistan, agricultural activity improved due to better weather conditions, while industrial production increased, helped by reduced political uncertainty following the February 2024 general elections.

Global Economic Outlook: 2.7% Growth in 2025 and 2026

The global economy is projected to expand by 2.7% in both 2025 and 2026, maintaining the same pace as in 2024, as inflation and interest rates gradually decline. Growth in developing economies is also expected to hold steady at about 4% over the next two years. However, this remains weaker than pre-pandemic levels, limiting progress in poverty reduction and sustainable development.

“The next 25 years will be a tougher slog for developing economies than the last 25,” said Indermit Gill, World Bank Group’s Chief Economist and Senior VP for Development Economics. “Most of the forces that once aided their rise have dissipated. Now, they face high debt burdens, weak investment and productivity growth, and rising costs of climate change.”

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Developing Economies: A Crucial Role in Global Growth

Developing economies now account for 45% of global GDP, up from 25% in 2000. Their interdependence has also increased, with over 40% of their goods exports going to other developing nations, double the share from 2000.

“In a world shaped by policy uncertainty and trade tensions, developing economies will need bold and far-reaching policies to seize untapped opportunities for cross-border cooperation,” said M. Ayhan Kose, Deputy Chief Economistat the World Bank.

He emphasized the need for strategic trade and investment partnerships, modernization of transport infrastructure, and standardization of customs processes to enhance trade efficiency. Sound macroeconomic policies will also be essential for navigating global economic uncertainties, he added.

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Path Ahead for Sustainable Growth

India’s projected steady growth at 6.7% reflects the resilience of its economy amidst global challenges, driven by robust private investment and a thriving services sector. However, balancing public and private investment, addressing manufacturing weaknesses, and enhancing agricultural productivity will remain pivotal for sustaining long-term growth. As South Asia and developing economies adapt to evolving global dynamics, leveraging opportunities in regional collaboration and trade integration could unlock new avenues for shared prosperity.