World Bank raises India’s GDP growth forecast to 6.5% for FY26, lowers it to 6.3% for FY27 due to US tariffs

The World Bank said in the latest update of South Asia’s development that high definitions in the United States and the emergence of artificial intelligence (AI) creates fresh uncertainty of South Asia’s economic growth.

The forecast of the gross domestic product of India has raised to 6.5 % for the 26th year of 6.3 %, but it expected growth in South Asia to 5.8 % in 2026 of 6.6 % in 2025. India is seen on growth by 6.3 % in the 27 fiscal year against 50 % of the United States.

The report issued on Tuesday said: “As for the year 2026, expectations have been reduced, as some of these effects relax and India continues to face the higher definitions of goods exports to the United States.”

India is expected to remain the fastest major economy in the world, which is supported by the continued strength in consumption growth, adding that local conditions, especially agricultural production and the growth of rural wages, have been better than expected. “government reforms are expected to support goods and services tax (GST) – which reduce the brackets of taxes and simplify compliance – activity.”

However, it has highlighted that India is expected to face an American tariff less than its competitors in April, but from the end of August it faces a much higher tariff. “Nearly five goods exports in India went to the United States in 2024, equivalent to about 2 % of GDP,” and indicated that the expectations of the FY27 were reduced due to a 50 % tariff imposition on about three quarters of goods in India.

Regardless of the 50 % tariffs on India, the United States imposed a 20 % tariff on Bangladesh, Sri Lanka and 10 % on the Maldives in Nepal, Bhutan. The report said: “As a result of these increases, most of the goods that were exported from Bangladesh to the United States face a tariff of 35 %; from Sri Lanka, 30 %; and from India, 52 %,”

“Increased commercial openness and the adoption of Amnesty International may be transformative to South Asia,” said Franzeska Aonsorg, South Asian chief economist. She also said: “Politics measures to facilitate the allocation of workers through companies, activities and sites can help direct resources to the productive sectors and are decisive to enhance investment and create job opportunities in the region.”

The report also indicated that South Asia can enhance the foundations for increasing the benefits of artificial intelligence by raising the skilled workers’ share and ensuring reliable electricity, as well as access to fast and fast internet. “Improving infrastructure and facilitating employment transport can help increase the benefits of artificial intelligence while reducing labor market disorders.”

He pointed out that throughout South Asia, about 22 % of the jobs of Amnesty International are exposed, as it was measured through the overlap between the skills required in the occupation and the capabilities of artificial intelligence.

She said that the workforce in South Asia limits exposure to adoption of artificial intelligence due to the dominance of low -skilled, agricultural and manual functions, while warning that educated young workers, especially in sectors such as business and information technology services, are at risk. The report said: “Since the release of ChatGPT, the job lists have decreased by 20 % in the most exposed jobs, most of which are replaced by artificial intelligence for other professions,” the report said.

Its recommendations include steps to help accelerate the creation of job opportunities by simplifying the size -based regulations that inhibit the growth of companies, improving transportation and digital communication, more transparent housing search options, lifting at work, as well as providing safety networks for affected workers.