World Bank South Asia Development Update Flags Tariff Barriers and AI Transition Risks in Growth Outlook
SDG 8: Decent Work & Economic Growth | SDG 9: Industry, Innovation & Infrastructure
Institutions: Ministry of Commerce & Industry | NITI Aayog
The World Bank’s South Asia Development Update (October 2025) projects robust regional growth at 6.6% in 2025, moderating to 5.8% in 2026, while India is expected to remain the world’s fastest-growing major economy, expanding 6.5% in FY26 before easing to 6.3% in FY27. The deceleration is linked partly to geopolitical risks and rising trade barriers, including the recent US tariff hikes that impose an effective 52% duty on most Indian goods exports.
The report identifies two critical levers for sustaining growth and creating quality jobs — trade liberalisation (reducing import tariffs, particularly on manufacturing inputs) and technology adoption, especially Artificial Intelligence (AI). While AI may automate up to 7% of South Asian jobs, it also offers a 30% wage premium for high-skill roles that complement it. In India, demand for AI-linked skills has grown 75% faster than for other jobs, even as listings for the most AI-exposed occupations have fallen 20% since late 2022.
The report’s forward-looking framework calls for sequenced tariff cuts, large-scale digital infrastructure investment, and targeted upskilling to build job-market resilience. By 2047, these interventions could redefine India’s labour structure, ensuring productivity gains are broad-based and inclusive.
Regional Context:
In parallel, the World Bank’s East Asia and Pacific Economic Update (October 2025) warns that jobless growth and productivity stagnation are emerging risks across Asia’s middle-income economies, such as China, Vietnam, and Indonesia. Although India is not part of that regional grouping, the shared diagnosis reinforces that without firm-level reforms, digital skilling, and innovation diffusion, even high-growth economies risk falling into a jobs-quality trap. Together, the twin updates frame a common policy horizon for Asia’s economic transformation — balancing competitiveness, inclusion, and technology adaptation.
What is the South Asia Development Update?
The South Asia Development Update is the World Bank’s biannual macroeconomic assessment covering eight South Asian economies: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka. It analyses regional growth trends, fiscal and trade dynamics, and structural transformation drivers such as technology and human capital.
Follow the full report here: World Bank – South Asia Development Update (October 2025)
World Bank – East Asia and Pacific: Bolder Reforms Key to Generating Jobs and Faster Growth