India’s 7.1% Growth Forecast Puts Domestic Demand, Exports and AI in the Spotlight

India’s performance also forms part of a broader regional growth story, with the World Bank Group’s latest South Asia Economic Update projecting growth of 6.9% for South Asia in 2026, keeping it the strongest-growing region.

India's economy is projected to grow by 7.1% in FY27, with robust domestic demand and strong exports supporting its expansion despite pressure from the global economy, according to the World Bank's latest India Development Update. The forecast keeps India among the world's fastest-growing major economies and reinforces its role as a key contributor to global growth. The report describes the country's medium-term prospects as strong, with its special focus on artificial intelligence examining how India can turn its technical talent, internationally connected businesses and digital infrastructure into wider development gains.

Strong growth comes with risks beyond India's borders

The growth outlook carries elevated external risks, including changes in global oil prices, El Niño and stock market corrections that could trigger volatility in capital flows. These risks matter because a strong domestic economy can still face disruption from developments beyond its borders, affecting the conditions in which businesses invest and households spend. The World Bank's assessment places India's growth prospects alongside these vulnerabilities, making clear that the country's economic momentum does not remove its exposure to global uncertainty.

India's performance also forms part of a broader regional growth story, with the World Bank Group's latest South Asia Economic Update projecting growth of 6.9% for South Asia in 2026, keeping it the strongest-growing region. The India Development Update serves as a companion to that regional report, bringing the discussion closer to India's own economic conditions and development opportunities. Both updates give particular attention to AI adoption, examining its potential to raise productivity, create export opportunities and improve the delivery of public services.

India's AI opportunity is gaining financial and workforce strength

The special focus, India and Artificial Intelligence: Seizing the Development Opportunity, identifies India's large technical workforce, globally integrated IT sector and digital public infrastructure as important foundations for AI adoption. Private AI investment rose from $1.2 billion in 2024 to $4.1 billion in 2025, more than tripling in a year. Employment at Global Capability Centers grew from 1.9 million professionals to 2.36 million over the same period, adding to the scale of the workforce supporting internationally connected business operations.

Paul Procee, the World Bank's Acting Country Director for India, described the country as one of the top 10 emerging-market performers on AI readiness and emphasised its potential as a development tool for improving productivity and public services. Through AgriConnect, the World Bank Group is investing in "small AI", meaning targeted tools adapted to local conditions so that their gains can reach more people. The approach connects technology adoption with support for workers through the transition, making access and practical usefulness central to the development opportunity.

Wider benefits depend on access, skills and clear rules

The report acknowledges that AI's long-term economic and labour market effects remain uncertain, calling for policies that strengthen AI-enabling infrastructure, improve the business environment, broaden access and build workforce capacity. For much of South Asia, the greatest gains could come from adopting existing AI technologies and adapting them to local needs, including applications suited to settings with limited resources. Small firms will need fewer barriers to adoption, local innovators will need supportive conditions, and clear regulation will need to reduce uncertainty and safeguard data security and privacy.

Franziska Ohnsorge, the World Bank Group's Chief Economist for Asia, said AI could reshape South Asia's development through stronger labour productivity, expanded exports and better public services, with foundational gaps determining how much of that promise becomes reality. The Update recommends stronger workforce skills, a more supportive business environment and better physical and digital infrastructure, placing these practical requirements at the centre of efforts to spread AI's benefits across the economy.