World Bank Raises India GDP Growth Forecast To 7.1% For FY27, Sees AI Driving Productivity Gains

The World Bank has raised India's economic growth forecast for FY27 to 7.1%, up 50 basis points from its previous projection of 6.6%, as strong industrial and services activity offsets weakness in agriculture.

In its October South Asia Economic Update released on Oct 6, the World Bank projected India's growth at 7.2% in FY28. The economy expanded 7.8% in FY26, slightly exceeding the Bank's earlier estimate.

Strong domestic demand and momentum across industry and services are expected to support economic activity.

As per a report by Moneycontrol, the Bank also highlighted labour code consolidation, GST reforms, tariff rationalisation, the Insolvency Act and investments in physical and digital infrastructure as factors supporting India's longer-term growth prospects.

India remains a key driver of South Asia's expansion. The region is expected to grow 6.9% in 2026 and 6.7% in 2027. Excluding India, growth is projected at 3.6% and 3.8%, respectively.

AI adoption gains momentum in India

The World Bank identified artificial intelligence (AI) as a potential contributor to India's next phase of productivity growth.

Its survey found that 23.4% of formal Indian firms use some form of AI, compared with 42.7% in the US. India scored 0.27 on the Bank's AI Adoption Index, against 0.85 for the US.

Only 3.5% of Indian firms reported paying for AI software or subscriptions, compared with 23.1% of US companies.

However, AI adoption among Indian companies has accelerated sharply since late 2024 after remaining close to zero in mid-2024.

Infrastructure, skills key to faster AI growth

Around 72% of Indian firms said improved digital infrastructure would encourage greater AI adoption, while 55% cited improvements in tertiary education.

Expectations of productivity benefits remain mixed. Nearly three-fourths of Indian firms anticipate zero or negligible productivity gains from faster AI development over the next three years, while about 8% expect gains of 20% or more.

The report also found that links between US customers and South Asian suppliers grew fastest in sectors where both sides had high exposure to AI, challenging concerns that generative AI would primarily shift outsourced work back to advanced economies.