India fastest growing economy, GDP to grow at 6.6% in FY25: World Bank

India will continue to be the fastest-growing economy among the world's largest economies, albeit its growth rate is expected to slow down marginally in the current fiscal, according to the World Bank’s Global Economic Prospects report.

The World Bank maintained its growth forecast for India at 6.6% for FY25. After achieving a high growth rate in FY24, India is projected to have a steady growth rate of 6.7% per year, on average, over the next three fiscal years starting FY25.

The World Bank attributed the expected moderation in India's growth to a slowdown in investment from a high base. However, it noted that investment growth is still anticipated to be stronger than previously expected and remains robust throughout the forecast period (FY25-FY27), supported by substantial public as well as private investments. Private consumption growth is projected to benefit from a recovery in agricultural production and decreasing inflation. In contrast, government consumption is expected to grow slowly, aligning with the government's goal of reducing current expenditure relative to GDP.

For FY26 and FY27, the World Bank predicts India’s economy will grow at 6.7% and 6.8%, respectively. In FY24, the National Statistical Office estimated that India's gross domestic product (GDP) grew by 8.2%.

India and Indonesia exemplify strong economic performance. India's economy has been bolstered by robust domestic demand, increased investment, and vigorous services activity. It is expected to grow at an average rate of 6.7% per fiscal year from 2024 through 2026, positioning South Asia as the world's fastest-growing region.

Some large Emerging market and developing economies (EMDEs), such as India, are expected to see continued solid per capita growth, it states.

The South Asia region's (SAR’s) growth is expected to decline from 6.6% in 2023 to 6.2% in 2024, largely because India's growth is slowing from its recent peak. Despite this moderation, India's consistent performance is anticipated to maintain regional growth at 6.2% for 2025-26.

"Growth in SAR is estimated to have increased to 6.6% in 2023, largely driven by faster growth in India. Growth in SAR is projected to slow to 6.2% in 2024 and stay at that rate in 2025-26, mainly reflecting steady growth in India," the multilateral bank added.

Recently, the Reserve Bank of India (RBI) in its latest MPC (monetary policy committee) meeting updated its GDP forecast for FY 2024-25, raising the estimate from 7% to 7.2%. The revised quarterly GDP estimates for FY25 are 7.3% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4.

"Strengthening agricultural sector activity is expected to boost rural consumption. On the other hand, sustained buoyancy in services activity should continue to support urban consumption. The healthy balance sheets of banks and corporates; government’s continued thrust on capex; high capacity utilisation, and business optimism augur well for investment activity. External demand should get a fillip from improving prospects of global trade,” RBI Governor Shaktikanta Das said post MPC meeting last week.