India is expected to remain the world’s fastest-growing major economy, driven by strong consumption growth, improved agricultural output, and rising rural wages, according to a World Bank report released on Tuesday.
The World Bank has raised India’s growth forecast for FY26 to 6.5%, up from its earlier projection of 6.3% in June. The revision reflects resilient domestic demand, a strong rural recovery, and the positive impact of recent tax reforms.
For other South Asian economies, the report projects mixed trends. Bangladesh is expected to grow at 4.8% in FY26, while Bhutan’s forecast has been downgraded to 7.3% due to delays in hydropower construction, although growth is expected to rebound in FY27. Growth in the Maldives is projected to slow to 3.9%, and Nepal’s economy is likely to expand by only 2.1%, amid recent unrest and heightened political and economic uncertainty. Sri Lanka, on the other hand, has seen its FY26 forecast upgraded to 3.5% due to strong performance in tourism and service exports.
Overall, South Asia’s growth is projected to remain robust at 6.6% this year but is expected to slow to 5.8% in 2026, a downward revision of 0.6 percentage points from the April forecast. The report identifies several downside risks, including spillovers from the global economic slowdown, uncertainty around trade policy, socio-political unrest in the region, and labor market disruptions driven by emerging technologies such as artificial intelligence (AI).
“South Asia has enormous economic potential and is still the fastest-growing region in the world. But countries need to proactively address risks to growth,” said Johannes Zutt, World Bank Vice President for South Asia. “Countries can boost productivity, attract private investment, and create jobs for the region’s rapidly expanding workforce by maximizing the benefits of AI and lowering trade barriers, especially for intermediate goods.”
The report emphasizes harnessing the potential of AI to enhance productivity and income. While South Asia’s workforce currently has limited exposure to AI, moderately educated young workers—particularly in business services and information technology—are vulnerable to job shifts. Since the release of ChatGPT, job listings for roles most exposed to AI have fallen by around 20% relative to other occupations.
However, AI also offers substantial productivity gains, particularly in sectors where it complements human labor. Job listings indicate a rapidly growing demand for AI-related skills, with such roles commanding wages nearly 30% higher than other professional positions.
The report recommends measures to accelerate job creation, including streamlining size-dependent regulations that hinder business growth, improving transport and digital connectivity, enhancing housing transparency, upskilling workers, facilitating job matching, and providing safety nets for those affected by technological shifts.
-IANS