World Bank’s Global Economic Prospects Report

Recently, The World Bank released its biennial Global Economic Prospects report. 

About the Global Economic Prospects report

• It provides insights into global economic trends, forecasts, and risks and provides growth projections for different countries and regions

Key findings of the report

• India’s Growth Projections
• • Fastest Growing Large Economy: India is expected to remain the fastest-growing large economy in the world.

• • FY2025/26: Growth is projected at 6.3%, though this forecast was slightly reduced (by 0.4 percentage points) from earlier predictions due to:
  • The FY2026-27 projection was cut by 20 basis points to 6.5%, while FY2027-28 growth is expected to reach 6.7%.
  • Strong services sector performance is expected to boost exports and sustain economic activity.
• India’s Domestic Policy and Debt
  • RBI’s Role: The Reserve Bank of India (RBI) cut its key interest rate by 50 basis points (total 100 bps in 2025) to 5.50%.
    • This was done to encourage domestic spending and investment, as inflation is low (projected 3.7% for FY26).
  • Growth Forecast Discrepancies: While the RBI expects 6.5% growth for FY26, many economists outside the government predict closer to 6%. The Indian government forecasts 6.3-6.8%.
  • Previous Year’s Growth: India’s GDP growth slowed to 6.5% in FY25 (from 9.2% in the previous year) due to slower industrial production, despite strong services and agriculture.
  • Fiscal Consolidation: The World Bank expects India to continue reducing its government debt.
    • Growing tax revenues and lower spending are expected to help reduce the public debt-to-GDP ratio.
    • The Indian government aims to reduce this ratio to 50% (49-51%) by FY31 from an estimated 56.1% in FY26.
• Global Economic Outlook
  • Widespread Reductions: The World Bank reduced growth forecasts for nearly 70% of economies worldwide due to “heightened trade tensions and policy uncertainty”. 
  • Slowest Growth Since 2008: Global growth is expected to slow to 2.3% in 2025 (excluding global recessions), which is the slowest pace since 2008.
  • Continuing Slowdown: Growth is predicted to pick up only slightly in 2026 (2.4%) and 2027 (2.6%).
  • Developing countries outside Asia are showing very slow growth and are becoming like “development-free zones.” 
    • Over the past three decades, their growth has fallen from 6% in the 2000s to less than 4% in the 2020s. At the same time, global trade and investment growth have slowed down, while debt levels have gone up sharply.
  • Trade Tensions Impact: Increased trade tensions and uncertainty are major reasons for the global slowdown.
• Potential for Rebound
• • Resolving Trade Disputes: The World Bank suggests that if major economies resolve trade tensions, global growth could be stronger.
    • Halving tariffs could add 0.2 percentage points to global growth on average in 2025 and 2026.

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