The World Bank has raised its forecast for India's economic growth in the fiscal year 2027 to 7.1 percent, an increase from the previous forecast of 6.6 percent. This change is due to stronger-than-expected growth in domestic demand and exports, although the World Bank warned that global risks remain high.
Positive Forecasts Amid Challenging Conditions
In the latest India Development Report released on Tuesday, the World Bank stated that India's economic growth outlook remains strong in the medium term, despite global challenges. However, the institution pointed to risks from rising global oil prices, the El Niño phenomenon, and potential reforms in the stock market that could create volatility in capital flows.
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The Role of Artificial Intelligence in Economic Development
The report also highlighted artificial intelligence (AI) as a potential new source for enhancing productivity and economic growth in India, provided that necessary policies are adopted to support its broader adoption. Private investment in AI in India has increased from $1.2 billion in 2024 to $4.1 billion in 2025. Additionally, the number of employees in global capability centers has risen from 1.9 million in 2024 to 2.36 million in 2025.
Paul Procy, the acting country director of the World Bank in India, stated: "India is one of the top 10 emerging markets in terms of readiness for AI." He added: "Using AI as a tool for development, not just as a technology, can be one of India's strongest levers for enhancing productivity and improving public services."
The report also raised the need for policy action to strengthen appropriate infrastructure for AI, improve the business environment, expand access to AI, and enhance workforce capacity so that its benefits can be more widely shared.
Ultimately, the World Bank has projected that the South Asia region will achieve a growth rate of 6.9 percent by 2026, remaining the fastest-growing region in the world. The report emphasizes that broader adoption of AI in this region depends on reducing barriers for small businesses, supporting local innovations, and creating legal frameworks that ensure transparency and protect data security and privacy.
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