New Delhi — India is expected to continue as the world’s fastest-growing major economy, supported by strong consumption, improved agricultural output, and rising rural wages, according to a World Bank report released on Tuesday.
The World Bank raised India’s growth forecast for FY26 to 6.5%, up from 6.3% projected in June, citing resilient domestic demand, a robust rural recovery, and the positive impact of tax reforms.
For the region, the report forecasts:
Bangladesh: 4.8% growth in FY26
Bhutan: Downgraded to 7.3% due to hydropower construction delays, expected to rebound in FY27
Maldives: 3.9%
Nepal: 2.1% due to recent unrest and political-economic uncertainty
Sri Lanka: Upgraded to 3.5% on the back of strong tourism and service exports
Overall, South Asia’s growth is projected at 6.6% in 2025, slowing to 5.8% in 2026, down 0.6 percentage points from April forecasts. Key risks include spillovers from a global economic slowdown, trade policy uncertainties, regional sociopolitical unrest, and labour market disruptions from emerging technologies like AI.
Johannes Zutt, World Bank Vice President for South Asia, said, “South Asia has enormous economic potential and is still the fastest growing region in the world. But countries need to proactively address risks to growth. Leveraging AI, boosting productivity, and lowering trade barriers can spur private investment and job creation.”
The report highlights that AI adoption could transform South Asia’s workforce, which currently has limited exposure due to the prevalence of low-skill, agricultural, and manual jobs. While AI has reduced job listings in some sectors by about 20%, it also creates opportunities in areas like business services and IT, offering a wage premium of nearly 30% for AI-related roles.
Recommendations include:
Streamlining size-dependent regulations to encourage firm growth
Improving transport and digital connectivity
Providing transparent housing search options
Focusing on upskilling and job matching
Implementing safety nets for affected workers
The report underlines that with the right policies, South Asia can harness AI and other technologies to accelerate productivity, create jobs, and maintain strong economic growth.
With inputs from IANS