Washington, April 8 (NationPress) India's economy is anticipated to expand by 7.6 percent in FY2025/26, before easing to 6.6 percent in the subsequent year, serving as an anchor for South Asia, even as the region's growth is expected to decelerate to 6.3 percent in 2026, according to a report from the World Bank released on Wednesday.

The latest South Asia Economic Update highlights that India continues to be the principal driver of regional growth, buoyed by robust domestic demand, trade reforms, and new agreements, including a free trade agreement with the European Union.

The World Bank projects that overall growth in South Asia will decrease from 7 percent in 2025 due to disruptions in global energy markets and geopolitical uncertainties, but is expected to rebound to 6.9 percent by 2027.

In its findings, the World Bank emphasized that this favorable performance can be attributed solely to India, underscoring New Delhi's pivotal role in maintaining regional economic momentum.

India's growth has accelerated thanks to strong consumption and resilient services exports, despite facing challenges in goods exports due to global trade fluctuations. The report indicates that domestic demand remains robust, supported by policy reforms and enhanced consumer confidence.

Nevertheless, the outlook is clouded by increasing external risks.

The region’s dependency on imported energy makes India vulnerable to surging oil prices stemming from conflicts in the Middle East. Rising energy costs could escalate inflation, tighten financial conditions, and impact household spending.

“Despite a challenging global environment, South Asia’s growth prospects remain robust,” stated Johannes Zutt, World Bank Vice President for South Asia. “Countries need to implement essential policy reforms to sustain growth, generate employment, and enhance resilience to shocks.”

The report stressed that India's economic path will significantly influence the overall performance of the region. Excluding India, South Asia's growth is likely to align more closely with other emerging markets.

Industrial policy—widely applied across South Asia and increasingly in India—has yielded mixed outcomes.

“Import-restricting policies… have resulted in considerable declines in imports, yet export-promoting initiatives have not corresponded with significant increases in exports,” the report stated.

India has concentrated its industrial policy on high-wage and high-productivity sectors, particularly in manufacturing. However, the services sector—especially IT and business process outsourcing—remains a crucial driver of employment, despite receiving less policy focus.

The World Bank cautioned that advancements in artificial intelligence could disrupt services exports, a vital strength for India, while simultaneously creating opportunities in higher-value segments.

Franziska Ohnsorge, World Bank Chief Economist for South Asia, mentioned that targeted interventions could still foster growth.

“While broad-based reforms are essential, precisely calibrated industrial policies could address specific market failures,” she noted, highlighting the importance of skill development, industrial parks, and improved export standards.

The report emphasized that maintaining India's growth will necessitate ongoing reforms to enhance infrastructure, reduce trade barriers, and strengthen the business climate.

As per the World Bank, India's strong domestic demand, services exports, and trade reforms have mitigated global uncertainties, keeping growth rates higher than those of many emerging economies.

South Asia achieved a growth rate of 7 percent in 2025, largely propelled by India's performance. Absent recent disruptions in global energy markets, growth would likely have remained stable in the near future.

The Bank asserted that India's policy direction will be crucial—not only for sustaining its growth trajectory but also for shaping the broader economic landscape across South Asia.