The India FY27 growth forecast has been raised to 7.1% by the World Bank, up from its earlier estimate of 6.6% released in June. The upgrade reflects strong domestic demand and continued momentum in industry and services, although weakness in agriculture remains a key near-term risk.
The World Bank, in its October South Asia Economic Update, expects India’s economy to grow 7.2% in FY28, while noting that the country expanded 7.8% in FY26.
Why the World Bank Raised India’s Growth Forecast
The World Bank said domestic demand, industrial activity and services are expected to remain the main drivers of growth in FY27.
It also pointed to longer-term structural factors, including labour-code consolidation, GST reforms, tariff rationalisation, the Insolvency Act and investment in physical and digital infrastructure.
India is expected to remain the biggest contributor to South Asia’s economic growth. The region is projected to expand 6.9% in 2026 and 6.7% in 2027, while growth excluding India is forecast at only 3.6% and 3.8%, respectively.
AI Emerges as a Potential Growth Driver
The report also places artificial intelligence at the centre of India’s longer-term growth prospects.
A World Bank survey found that 23.4% of Indian formal firms use AI, compared with 42.7% in the US. India’s AI Adoption Index score stands at 0.27, significantly below the US score of 0.85.
Only 3.5% of Indian firms reported paying for AI software or subscriptions, compared with 23.1% of US firms. However, AI adoption among Indian companies has accelerated sharply since late 2024.
The World Bank identified digital infrastructure and education as important factors that could speed up adoption. Around 72% of surveyed Indian firms said better digital infrastructure could increase AI use, while 55% highlighted tertiary education.
AI Could Create New Services Export Opportunities
The report suggests AI could also create higher-value opportunities for India’s services sector rather than simply eliminating outsourced work.
At the same time, routine business-process outsourcing could face greater automation risks as AI capabilities improve.
Agriculture Remains a Key Risk
Despite the stronger growth outlook, agriculture remains a concern. India experienced its fourth-driest June-August period since 1960, according to the report.
A larger-than-expected monsoon deficit could reduce agricultural output and rural demand while adding pressure to food inflation. However, stronger performance across industry and services is expected to cushion the broader economy.
Overall, the World Bank’s revised outlook points to strong near-term momentum, while reforms, digital infrastructure and AI adoption could determine how India sustains growth over the longer term.
Relevant Link: World Bank
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