Winning Bizness Desk

Mumbai.The World Bank has raised its growth forecast for India’s economy in 2026-27 to 7.1% from the earlier estimate of 6.6%, citing stronger-than-expected economic activity despite global trade disruptions and geopolitical tensions.

The revised projection was released in the latest India Development Update on Tuesday, October 6. The report said India’s economy performed better than expected in the opening quarter of FY27, supported by robust consumer spending, government investment, industrial activity and exports. India’s GDP grew 7.8% in the April-June quarter, significantly higher than the Reserve Bank of India’s 7% estimate. The strong first-quarter performance has led the World Bank to upgrade its full-year forecast.

Consumer spending gives India’s growth cycle major push

Private consumption grew 7.1% during the first quarter, with spending rising in both urban and rural markets.Tax relief and lower GST rates left more disposable income with urban consumers, while government welfare measures strengthened purchasing power in rural areas.

The report points to several factors supporting household demand:

• Higher disposable income in cities
• Increased rural purchasing power
• Strong demand for consumer goods
• Greater spending across urban and rural markets
• This rise in consumption has provided direct support to businesses and manufacturers.

Government capital spending boosts infrastructure and investment

Government spending on roads, bridges and other infrastructure has also strengthened economic activity. Capital expenditure increased 29.9% between April and July 2026.

Total investment during the period rose 11.9%, reflecting higher government spending and stronger economic activity. The construction push also increased demand for industrial materials. Production of key products such as cement and steel grew 7.2% during the period.

Industrial activity accelerates as factories raise production

Industrial growth rose to 8.6%, compared with 6.1% a year earlier. Manufacturing recorded 9.2% growth, while electricity generation and related activity expanded 8.9%. Higher vehicle purchases, increased demand for packaged food and strong electricity consumption during the summer contributed to the rise in industrial production.

The stronger industrial performance indicates that demand is spreading beyond services and into manufacturing and other productive sectors.

Services remain major engine of India’s economic expansion

The services sector grew 10% during the period, maintaining its position as one of the biggest contributors to overall economic growth. Banking, real estate, information technology and professional services recorded combined growth of 12.1%.

Strong demand for homes and property supported real estate activity, while Indian IT companies continued to benefit from demand for software and business services in overseas markets.

Exports rise despite global trade and geopolitical pressures

India’s total exports in US dollar terms increased 16.2% during the first quarter. Exports of refined petroleum products, including petrol and diesel, rose 36.6%. Indian IT and business services also remained in strong demand internationally. The services trade generated a surplus of $51.6 billion, providing important support to the country’s external position.

Stronger banks and record reserves improve economic stability

India’s banking system has also strengthened, with gross non-performing assets falling to 1.7% in June 2026, the lowest level recorded so far. Bank credit growth rose to 18%, helping improve access to loans for households and businesses. India’s foreign exchange reserves reached a record $785 billion on September 4, 2026. The reserves were sufficient to cover around 11.5 months of imports.

The report also highlighted measures aimed at containing inflation and protecting household budgets.

• Excise duty on petrol and diesel was cut by Rs 10 per litre.
• Domestic LPG production increased 28%.
• Food and fuel subsidies helped contain pressure on consumers.
• Corporate tax collections rose 20%.
• Personal income-tax collections increased 24%.
• Overall government revenue grew 19.3%.
• The government also created a Rs 1 lakh crore economic stabilisation fund with the help of a large dividend received from the RBI.

Growth expected to moderate but overall outlook stays strong

The World Bank said India’s economy grew 7.2% in FY25 before accelerating to 7.8% in FY26. Although growth is expected to moderate in the coming quarters after the strong 7.8% expansion recorded in the first quarter of FY27, the overall economic trend remains strong.

The combination of consumer demand, public investment, industrial expansion, services growth, exports, stronger banks and high foreign exchange reserves continues to support India’s growth outlook.