Washington, April 8 (NationPress) The World Bank announced on Wednesday that India is projected to achieve a remarkable 7.6% GDP growth for the fiscal year 2025-26. Additionally, the growth forecast for 2026-27 has been revised upwards to 6.6% from the previous estimate of 6.3%.

According to the World Bank Group's semi-annual regional outlook report, the country's optimistic growth outlook is largely attributed to strong domestic demand, tariff reductions, and recent trade agreements, notably the free trade agreement with the European Union.

The report indicates that growth in South Asia is expected to decelerate to 6.3% in 2026, down from 7% in 2025, primarily due to disturbances in global energy markets.

The latest South Asia Economic Update, titled Working with Industrial Policy, anticipates a recovery to 6.9% growth in 2027. Despite the short-term slowdown, South Asia continues to outpace other emerging markets and developing economies. The region's dependence on imported energy, significantly influenced by India, places its growth outlook at risk from the ongoing conflict in the Middle East, adding a layer of uncertainty. A swift resolution could enhance growth prospects, whereas further disruptions in global energy markets may escalate inflation, necessitate tighter monetary policies, and hinder remittances.

Furthermore, challenges such as global financial instability, climate impacts like the recent Cyclone Ditwah in Sri Lanka, and the implications of AI on service exports could introduce additional risks. The report highlights the urgent need for the region to accelerate job creation to support its growing workforce.

Johannes Zutt, World Bank Vice President for South Asia, remarked, "Despite a challenging global landscape, South Asia's growth potential remains considerable." He emphasized the importance of implementing essential policy reforms to sustain growth, generate employment, and enhance resilience against shocks. Comprehensive policies aimed at improving public infrastructure, eliminating trade barriers, fostering a business-friendly environment, and attracting private investment are crucial for diversifying growth sources and creating jobs that alleviate poverty and promote shared prosperity.

The report further delves into the intricacies of industrial policy—the array of governmental strategies to influence economic production rather than relying solely on market forces. There's a noticeable trend of governments globally adopting industrial policies, with South Asia implementing these strategies at approximately double the rate of other emerging economies.

About half of South Asia's industrial policies target the manufacturing sector, focusing on fostering sectors that yield more employment, higher wages, or larger, more productive firms compared to others. Nevertheless, the services sector has emerged as the primary driver of job growth outside agriculture, despite often being overlooked by industrial policies.

The effectiveness of industrial policy measures in South Asia has been mixed. For example, while import-restrictive policies significantly curtailed imports, export-promoting measures did not yield comparable increases in exports, according to the report.

Franziska Ohnsorge, Chief Economist for South Asia at the World Bank Group, noted, "The mixed outcomes of industrial policy in South Asia partly stem from the region's limited implementation capacity, fiscal constraints, and market size in certain countries." She advocated for broad-based reforms while suggesting that well-targeted industrial policies could mitigate specific market failures through initiatives like industrial parks, skill development programs, and improved export quality standards.

The report concludes by recommending the adoption of well-structured policy measures in sectors such as urban development, tourism, and digital services, coupled with overarching improvements in the business climate, regulatory stability, and governmental capacity, which are vital for job creation.