India to clock about 6.7% growth between 2024-2026: World Bank

The Indian economy, buoyed by strong domestic demand, a surge in investment and robust services activity, is projected to grow an average of 6.7% per fiscal year from 2024 through 2026, making South Asia the world’s fastest-growing region, the World Bank said on Tuesday.

In its latest Global Economic Prospects report, the World Bank said India will remain the fastest-growing large economy. According to the forecast, India is set to report 6.6%, 6.7% and 6.8% growth, respectively, in FY24, FY25 and FY26.

By comparison, global growth is projected to hold steady at 2.6% in 2024 before edging up to an average of 2.7% in 2025 and 2026, respectively.

That is well below the 3.1% average in the decade before covid-19.

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"The forecast implies that over the course of 2024-26 countries that collectively account for more than 80% of the world's population and global GDP would still be growing more slowly than they did in the decade before covid-19," the World Bank said.

Forecasts for 2024 growth

“However, the forecasts for 2024 growth reflect downgrades in three out of every four low-income economies since January. In advanced economies, growth is set to remain steady at 1.5% in 2024 before rising to 1.7% in 2025.”

Overall, developing economies are projected to grow 4% on average over 2024-25, slightly slower than in 2023. Growth in low-income economies is expected to accelerate to 5% in 2024 from 3.8% in 2023.

Meanwhile, growth in the South Asia (SAR) region is projected to slow from 6.6% in 2023 to 6.2% in 2024, mainly due to a moderation of growth in India from a high base in recent years, the World Bank said.

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However, with steady growth in India, regional growth is forecast to stay at 6.2% in 2025-26, it added.

Among the region's other economies, growth is expected to remain robust in Bangladesh, though at a slower rate than in the past several years, and to strengthen in Pakistan and Sri Lanka.

"However, investment growth (in India) is still expected to be stronger than previously envisaged and remain robust over the forecast period, with strong public investment accompanied by private investment," the World Bank said.

It said that private consumption growth in India is expected to benefit from a recovery of agricultural production and declining inflation.

Government consumption is projected to grow only slowly, in line with the Centre''s aim of reducing current expenditure relative to GDP, it added.

According to the report, global inflation is expected to moderate to 3.5% in 2024 and 2.9% in 2025, but the pace of decline is slower than was projected just six months ago.

Many central banks, as a result, are expected to remain cautious in lowering policy interest rates.

Global interest rates are likely to remain high, averaging about 4% over 2025-26, roughly double the 2000-19 average, the World Bank said.