World Bank trims India's FY26 growth to 6.3% as South Asia slows
Economic growth in South Asia is set to decelerate to 5.8 per cent in 2025, following a weaker-than-expected expansion of 6 per cent in 2024. The slowdown is largely driven by rising global trade barriers, heightened policy uncertainty, and financial market volatility, according to the World Bank's 'Global Economic Prospects'.
South Asia's growth is set to slow to 5.8 per cent in 2025, down from 6 per cent in 2024, amid trade barriers and financial volatility, as per the World Bank. India's FY26 growth is revised to 6.3 per cent. Pakistan, Bangladesh, and Sri Lanka face mixed outlooks, while Nepal, Bhutan, and Maldives show resilience. Regional growth may average 6.2 per cent in 2026â€'27.
India, the region's largest economy, saw moderated growth in fiscal 2025 (FY25) (April 2024–March 2025), largely due to a slowdown in industrial output. India's growth is projected at 6.3 per cent in fiscal 2026 (FY26)—a downward revision of 0.4 percentage points (pp) from January forecasts—due to weaker exports and softening demand from key global trade partners. Growth is expected to improve to 6.6 per cent annually in FY27, driven by robust services exports.
Among other South Asian countries, Pakistan experienced a modest pickup in both agriculture and industry in FY25 (July–June). Growth is projected to rise to 3.1 per cent in FY26 and 3.4 per cent in FY27, supported by easing inflation and declining borrowing costs.
In Bangladesh, FY25 growth slowed due to political unrest and rising input costs that curtailed private investment. However, a rebound is expected with growth reaching 4.9 per cent in FY26 and 5.7 per cent in FY27, assuming improved political stability and reform progress.
Sri Lanka saw a short-term recovery in 2024, but growth is forecast to decelerate to 3.5 per cent in 2025, hindered by structural constraints and global uncertainties. In contrast, Maldives is expected to grow 5.7 per cent in 2025 before moderating to 5.3 per cent in 2026 amid weakening external demand.
Nepal and Bhutan are benefitting from expanded hydroelectric capacity, with growth set to firm in both countries. Afghanistan, however, remains constrained, with growth estimated at just 2.2 per cent in FY26 due to reduced foreign aid flows.
Looking ahead, South Asia's growth is projected to average 6.2 per cent in 2026–27, driven by India's recovery and regional improvements. Excluding India, growth is forecast at 3.6 per cent in 2025, rising to 4.4 per cent in FY27.
Key risks include intensifying global trade protectionism, tighter financial conditions due to higher global inflation, potential capital outflows, domestic unrest, and natural disasters—any of which could derail recovery efforts across the region.
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