The World Bank forecasts India’s economic growth to stabilize at 6.7% per annum for the fiscal years beginning April 2025. This steady outlook is supported by robust services sector growth, strengthening manufacturing activities, and rising private investments. Although a slowdown is projected for FY2024/25 at 6.5%, private consumption remains resilient, fueled by rising rural incomes and improved agricultural performance. Across South Asia, growth is set to rebound, with recoveries in Pakistan and Sri Lanka contributing to a regional expansion of 6.2% in FY2025/26. However, challenges persist in Bangladesh due to political unrest and energy shortages, weighing on its growth prospects.

India’s Steady Growth Forecast

Growth to stabilize at 6.7% from FY2025/26: The World Bank projects India’s economic growth to remain steady at 6.7% per annum for two consecutive fiscal years starting April 2025. This sustained performance highlights India’s resilience amidst global economic uncertainty.

Services and manufacturing as key drivers:

The services sector is poised for sustained expansion, capitalizing on favorable domestic and global demand.
Manufacturing activity is expected to gain momentum, driven by government policies aimed at enhancing the business environment.
Investment dynamics: Investment growth is projected to remain stable, with a moderation in public investment being offset by rising private sector contributions.

FY2024/25: A Slight Softening in Growth

Growth projected at 6.5% for FY2024/25: India’s economic growth is expected to decelerate slightly due to slower investment activity and weaker manufacturing output.

Private consumption remains resilient:

Improved rural incomes and a recovery in agricultural output have supported robust private consumption growth.
These factors underscore the importance of rural demand in stabilizing India’s economic trajectory.

South Asia’s Growth Outlook

Regional growth to reach 6.2% in FY2025/26: South Asia’s economic performance is forecast to improve, reflecting recoveries in key economies such as Pakistan and Sri Lanka.

Excluding India, growth in the region remains moderate:

Growth excluding India is estimated to rise to 4% in FY2025 and further to 4.3% in FY2026.
These figures reflect progress in addressing macroeconomic challenges but also underscore lingering risks.

Bangladesh Faces Economic Challenges

Political turmoil hampers growth: Political instability in mid-2024 adversely affected investor confidence and industrial activity in Bangladesh.

Energy shortages exacerbate supply constraints:

Limited energy availability and import restrictions have weakened industrial performance, creating upward pressure on prices.
These factors contributed to a downward revision of Bangladesh’s FY2024/25 growth forecast to 4.1%, although recovery to 5.4% is anticipated by FY2025/26.
Investment and industrial activity subdued: Heightened political uncertainty continues to weigh on investment and industrial output in the near term.

Actionable Insights for Stakeholders

Policy Focus: Policymakers in India should continue efforts to bolster manufacturing and attract private investment to sustain long-term growth.
Diversify Growth Drivers: South Asian economies should aim to diversify their growth drivers, reducing reliance on specific sectors or regions.
Address Regional Challenges: Countries like Bangladesh need to resolve political instability and infrastructure bottlenecks to unlock growth potential.