Stronger performance drives upgrade
In its South Asia Development Update published on October 7, 2025, the World Bank noted that India’s real GDP for April–June 2025 rose by 7.8 percent — well ahead of expectations. The jump was fuelled by robust private consumption, higher investment, and inflation remaining lower than projected.
“India is expected to remain the world’s fastest-growing major economy, underpinned by continued strength in consumption growth,” the report states. It cites favourable agricultural output and rural wage growth as key pillars. The bank also pointed to the government’s rationalisation of the GST — reducing tax slabs and simplifying compliance — as a catalyst for economic activity.
Tariff threat clouds FY27 outlook
Despite the upward revision for FY 2025–26, the World Bank has lowered its projection for FY 2026–27 from 6.5 percent to 6.3 percent. The driver of this change: the imposition of 50 percent tariffs by the U.S. on about three-quarters of India’s exports bound for American markets.
According to the report, as of August 2025, India faces higher tariffs than many of its competitors. Nearly one-fifth of India’s merchandise exports in 2024 were destined for the U.S., translating to about 2 percent of GDP. The World Bank views this as a dampener on India’s external demand and overall growth momentum in the coming year.
Outlook and risks
While India’s growth trajectory remains strong by global standards, the report cautions that external headwinds — particularly escalated trade barriers — could erode resilience. The 50 percent U.S. tariff may force Indian exporters to either absorb costs or pass them on, potentially hurting export volumes, profit margins, and global competitiveness.
On the domestic front, continued policy support, reforms in taxation and trade facilitation, and sustained investment in agriculture and infrastructure may help cushion the impact. However, the growth downgrade signals that India cannot remain impervious to global trade tensions.
