The World Bank has raised its growth forecast for South Asia, saying the region's economy is now expected to expand 6.9% in 2026 — 60 basis points above its previous projection — on resilient consumer demand that has so far absorbed an energy shock, Reuters reported on October 6.
The multilateral lender attributed the upgrade to government measures shielding consumers, strong remittances and resilient domestic demand, noting that higher energy prices had not interrupted momentum in consumption growth. But it warned that persistently high oil prices, a severe weather shock or a global market correction could still threaten the outlook.
India anchors the upgrade
India, the region's largest economy, is forecast to grow 7.1% in 2026/27, up from the 6.6% projected in June but below the 8.6% recorded in 2025/26, according to World Bank Chief Asia Economist Franziska Ohnsorge. Excluding India, the region's growth outlook was revised down to 3.6%, largely because of a sharp downgrade for Bangladesh. Inflation is expected to stay elevated into 2027, and Ohnsorge cautioned that it could take around 18 months for the shock to fully feed through into economic activity.
Rates and El Niño on the radar
Reuters also reported that India's central bank is expected to raise interest rates by 25 basis points on October 7 — its first increase since 2023 — with another hike likely in December, according to a majority of polled economists. A strong El Niño was flagged as another risk, particularly for India's agriculture and rural demand.
Sources: Reuters — South Asia growth holds firm, but energy shock, weather pose risks, says World Bank | Free Malaysia Today — South Asia growth holds firm, but energy, weather risks loom
The multilateral lender attributed the upgrade to government measures shielding consumers, strong remittances and resilient domestic demand, noting that higher energy prices had not interrupted momentum in consumption growth. But it warned that persistently high oil prices, a severe weather shock or a global market correction could still threaten the outlook.
India anchors the upgrade
India, the region's largest economy, is forecast to grow 7.1% in 2026/27, up from the 6.6% projected in June but below the 8.6% recorded in 2025/26, according to World Bank Chief Asia Economist Franziska Ohnsorge. Excluding India, the region's growth outlook was revised down to 3.6%, largely because of a sharp downgrade for Bangladesh. Inflation is expected to stay elevated into 2027, and Ohnsorge cautioned that it could take around 18 months for the shock to fully feed through into economic activity.
Rates and El Niño on the radar
Reuters also reported that India's central bank is expected to raise interest rates by 25 basis points on October 7 — its first increase since 2023 — with another hike likely in December, according to a majority of polled economists. A strong El Niño was flagged as another risk, particularly for India's agriculture and rural demand.
Sources: Reuters — South Asia growth holds firm, but energy shock, weather pose risks, says World Bank | Free Malaysia Today — South Asia growth holds firm, but energy, weather risks loom
