India’s GDP to Reach 6.6% by FY26, Says World Bank Amid Fiscal Concerns
New Delhi | 24 April 2025 — India’s economy is holding up well in a shaky global environment and the World Bank agrees. In its latest South Asia Economic Focus report, the international lender said India is expected to grow at a solid 6.6% in FY26, with strong domestic demand and big public investments playing a major role. But there’s a note of caution too: the country needs to keep an eye on its spending habits, especially if it wants to meet its fiscal goals.
Growth Engine Still Running Smooth
India has been one of the few bright spots globally when it comes to economic growth. After growing 7.5% in FY23, the country is expected to slow a bit — but not by much. The World Bank forecasts GDP growth of 6.4% in FY25, followed by 6.6% in FY26. That’s still well ahead of most major economies.
So, what’s driving the momentum? It’s a mix of things — rising private investments, resilient consumer spending, and a big push from the government’s infrastructure projects. According to the World Bank, this combination has kept the economy on solid ground despite inflation pressures and global uncertainty.
Tax Collections Are Up — But So Are Expenses
On the revenue side, there’s good news. India has been pulling in more tax money, thanks to higher GST collections and improved income tax compliance. That’s partly due to more businesses joining the formal economy and digital systems streamlining the process.
But here’s the catch: even with more money coming in, the government’s spending has gone up too — especially on subsidies and welfare schemes. And that’s where the warning bells are ringing.
India’s fiscal deficit — basically the gap between what the government earns and spends — is expected to be around 5.8% of GDP for FY24. The goal is to bring it down to 4.5% by FY26. The World Bank says that’ll only be possible if the government carefully manages how much it’s spending — especially on things that aren’t directly boosting growth.
One of the biggest contributors to India’s strong performance is public investment. Roads, highways, railways, digital infrastructure — the government’s been pumping money into all of it. And it’s working.
This kind of investment not only creates jobs, but also builds long-term capacity for the economy to grow. It encourages private players to come in and put their own money into the game. That’s a good cycle to be in.
The report doesn’t predict any major shocks ahead, but it does suggest India should be a little cautious. The global economy is still fragile, inflation remains a concern, and any surprises — geopolitical or economic — could hit exports or foreign investments.
India’s economic engine is still running strong, backed by healthy tax revenues and government investment. But it can’t afford to get too comfortable. Rising expenses, especially in areas that don’t offer long-term returns, could stretch the country’s finances. If the government can keep its spending in check while maintaining growth, India could continue to be a standout story on the global stage.