SDG 8: Decent Work and Economic Growth | SDG 17: Partnerships for the Goals
Ministry of Finance | Reserve Bank of India (RBI)
The World Bank’s January 2026 Global Economic Prospects report projects that India will continue to be a primary driver of global and regional growth, with real GDP forecast to expand by 7.2% in 2025, 6.2% in 2026, and 6.6% in 2027. While global growth is expected to moderate to 2.6% in 2026 due to fading supportive factors, India’s resilience is underpinned by robust domestic demand, substantial public investment, and steady services activity. This sustained performance positions India as the fastest-growing major economy, even as more than one-quarter of emerging market and developing economies (EMDEs) struggle with per capita incomes remaining below pre-pandemic levels.
Regional Dynamics and Global Integration
South Asia (SAR) Outlook: India leads a projected regional growth of 6.2% in 2026, although the region faces significant downside risks from escalating trade restrictions and extreme weather events.
Impact of Trade Barriers: The moderation in India’s 2026 forecast reflects the impact of increased import tariffs and the unwinding of previous trade “front-loading”.
External Tailwinds: Easing global financial conditions and stabilizing oil prices—projected at $60 per barrel in 2026—are expected to provide critical support to the domestic economy.
Strategic Challenges and Structural Risks
The Jobs Challenge: A critical global priority is generating enough quality employment for the 1.2 billion young people reaching working age in EMDEs by 2035.
Fiscal and Climate Vulnerabilities: India must navigate ongoing fiscal consolidation while addressing vulnerabilities to climate-related shocks that threaten long-term stability.
Debt and Investment: With public debt in EMDEs at its highest level in 50 years, the report emphasizes the urgency of maintaining fiscal rules to mobilize private capital for infrastructure and digital growth.
What is the 'Front-Loading' of trade, and how does it impact the 2026 growth forecast? It refers to the practice of businesses and households rushing to import or export goods earlier than planned to avoid impending economic disruptions, such as newly announced tariffs or tax increases. In 2025, global and Indian trade saw a "burst" because companies "front-loaded" shipments in anticipation of high U.S. import levies. This created an artificial boost in 2025 growth but leads to a projected slowdown or "payback" in 2026, as the demand that would have happened normally in 2026 was already satisfied earlier, combined with the actual implementation of the higher trade costs.
Policy Relevance
India’s economic path serves as a vital benchmark for navigating a fragmented global trade environment through domestic structural reforms and fiscal discipline.
Strategic Impact for India:
Diversifying Trade Partnerships: To mitigate the effects of shifting global tariff regimes, India should accelerate reforms to diversify export markets and strengthen regional trade agreements.
Restoring Fiscal Credibility: The report underscores that sticking to fiscal rules and improving revenue mobilization is essential to rebuild policy space and attract private investment.
Closing the Skills Gap: To address the “jobs challenge,” India must prioritize investments in digital infrastructure and human capital to align its workforce with the surge in AI-related spending.
Macro-Financial Stability: Easing inflation and lower energy prices provide a window for the Reserve Bank of India to maintain stable financial conditions while supporting high-productivity industrial growth.
Follow the full report here: World Bank January 2026 Global Economic Prospects