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The World Bank has expressed confidence in India’s economic resilience, stating the nation is well-equipped to navigate the current global energy shock thanks to robust foreign exchange reserves, ample fiscal space, and controlled inflation, which are set to bolster growth amidst international challenges.
Illustration: Dominic Xavier/Rediff
Key Points
- The World Bank believes India is well-positioned to manage the current global energy shock due to strong policy buffers, high Forex reserves, fiscal space, and low inflation.
- India’s GDP growth projections for the current fiscal have been raised to 6.6 per cent, with an estimated acceleration to 7.6 per cent in FY26, driven by domestic demand and export resilience.
- Despite facing some of the highest tariffs globally, India has remained the fastest-growing large economy, with income tax cuts and GST reductions supporting domestic consumption.
- The World Bank commended India’s strategy for handling the energy crisis, balancing supply management with maintaining stable retail oil prices to avoid sharp economic adjustments.
- Risks to growth are tilted to the downside, with the World Bank’s growth estimates assuming oil prices between USD 90-100 per barrel for FY27.
The World Bank on Thursday said India is well placed to weather the current global energy shock with ample buffers, including high foreign exchange reserves, fiscal space and low inflation, which will support growth despite global headwinds.
Addressing a conference a day after raising India’s GDP growth projections for the current fiscal to 6.6 per cent, the World Bank said India had dealt well the trade turbulence last fiscal and the Indian economy entered the current West Asia crisis, which has led to volatility in oil markets, “from a position of strength”.
India’s Economic Buffers and Growth Momentum
World Bank Regional Practice Director, Prosperity, for South Asia, Sebastian Eckardt said, “India has strong policy buffers, high Forex reserves, fiscal space, to provide support as needed, as well as low inflation, and strong goals moment going into this current shock.
And that strong growth momentum is supported by gross positive policies, including the EU FTA the new labour, all of these things, of course, reinforced and support strong growth momentum, and that’s fine.
Despite the global headwinds, we do see India and the region, continuing to be a very strong, performed gross performing region compared to other emerging markets across the world.
The World Bank in its South Asia Economic Update report released on Wednesday, had said India’s growth is estimated to have accelerated from 7.1 per cent in FY25 to 7.6 per cent in FY26 (April 2025-March 2026), owing to strong domestic demand and export resilience.
It projected growth to slow to 6.6 per cent in FY27, but the projection is higher than 6.5 per cent made in the Global Economic Prospects report released in January.
Resilience Amidst Global Challenges
World Bank Lead Economist for India Aurelien Kruse said India has remained the fastest-growing large economy in the world in FY26, despite facing some of the highest tariffs on its exports globally.
He said the income tax cuts and GST rate reductions last year supported domestic consumption, while exports and investment, areas which were expected to be adversely affected by tariffs, performed much better than anticipated.
“India showed very strong performance and resilience,” Kruse said.
Describing the current situation as a “major trade shock”, the World Bank said the risks to growth are tilted to the downside.
The World Bank has assumed oil price in FY27 at USD 90-100/ barrel for arriving at its growth estimates.
Government’s Energy Crisis Management
The US-based multilateral agency also appreciated the Indian government’s strategy of handling that energy crisis that emanated due to the West Asia conflict.
“The authorities have struck a right balance between taking measures to manage supply without doing massive rationing or massive restrictions, and also trying to soothe the initial volatility by maintaining retail prices of oil relatively constant to avoid kind of very sharp, nonlinear adjustments that would have been probably more detrimental than beneficial in the short term.
“So having said that, the risks are obviously massive. They’re tilted to the downside,” Kruse said.
On February 28, the United States and Israel launched military strikes against Iran, triggering sweeping retaliation from Tehran.
On April 8, Iran, the United States and Israel agreed on a two-week ceasefire in the war that tore across the West Asia and disrupted the global energy market.
