Chennai: India’s economy is projected to grow at 7.1% in FY27 supported by robust domestic demand and strong exports, despite global headwinds. According to the World Bank’s latest economic update, it remains one of the fastest-growing major economies in the world and a key contributor to global growth.
The medium-term prospects are strong, but it also cautions that external risks are elevated, including downside risks related to global oil prices, el Nino, and stock market corrections that would result in capital flow volatility.
It finds that India is well positioned to harness AI, thanks to its large technical workforce, globally integrated IT sector, and digital public infrastructure. Private AI investment had a three-fold increase from $1.2 billion in 2024 to $4.1 billion in 2025. At the same time, Global Capability Centres employed 1.9 million professionals in 2024, which grew to 2.36 million professionals in 2025.
The long-term economic and labour market impacts of AI remain uncertain. It calls for cross-cutting policy actions to deepen AI-enabling infrastructure and improve the business environment, while broadening AI access and enhancing labour capacity, so that the benefits of AI are broadly shared.
“India is one of the top 10 emerging market performers in AI readiness. Harnessing AI as a development tool and not just a technology could be a powerful lever to boost productivity and improve public services,” said Paul Procee, World Bank Acting Country Director for India.
Further, South Asia will grow 6.9% in 2026, retaining its status as the strongest-growing region. For most of the region, the greatest gains lie in adopting AI and adapting it to local conditions, including through small AI applications suited to low-resource settings. It will also depend on complementary measures to reduce barriers to AI adoption by small firms, foster local AI innovation, and establish a clear regulatory framework that reduces uncertainty and safeguards data security and privacy.
The WB recommends strengthening workforce skills, establishing a more business-enabling environment, and improving the physical and digital infrastructure.
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