India Projects 6.6% Growth Amid Global Energy Crisis and Supply Chain Turmoil

Resilience against these external headwinds is rooted in substantial foreign reserves, low inflation, and a financial sector characterized by health and stability. Furthermore, the economy benefits from predominantly rupee-denominated public debt and proactive trade diversification efforts. World Bank Acting Director for India, Paul Procee, emphasized that boosting private sector-led growth is critical for strengthening economic resilience and facilitating the entry of young people into the workforce. To realize the vision of Viksit Bharat, Procee noted that a predictable, business-enabling environment is necessary to unlock investment and scale job creation in priority sectors including energy, infrastructure, manufacturing, tourism, healthcare, and agribusiness.

The India Development Update serves as a companion piece to the broader South Asia Economic Update, titled Working with Industrial Policy, which evaluates prospects across the wider region. Growth in South Asia is projected to decelerate to 6.3% in 2026, down from 7% in 2025, primarily due to global energy market disruptions. Nevertheless, the region continues to outpace other emerging markets and developing economies, with growth expected to recover to 6.9% in 2027. This regional analysis highlights that South Asian governments implement industrial policies—tools used to shape economic production beyond market forces—at twice the rate of other emerging economies, though these measures have yielded mixed results.

Franziska Ohnsorge, World Bank Group Chief Economist for South Asia, attributed these mixed outcomes to limited implementation capacity, fiscal constraints, and restricted market sizes in certain nations. While broad-based reforms remain the priority, Ohnsorge suggested that well-calibrated industrial policies, such as industrial parks, skill development programs, market access assistance, and improved export quality standards, could address specific market failures. The World Bank recommends the implementation of carefully designed measures in urban development, tourism, and digital services, alongside improvements in regulatory predictability and state capacity to ensure sustainable job creation.