DBT Bureau
Pune, 7 Oct 2026
India’s economy is projected to grow at 7.1% in FY27 supported by robust domestic demand and strong exports, despite global headwinds. It remains one of the fastest-growing major economies in the world and a key contributor to global growth, says the World Bank’s latest economic update.
Released on 6th Oct, the India Development Update notes that medium term prospects are strong but 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.
The Update’s special focus, India and Artificial Intelligence: Seizing the Development Opportunity, highlights 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 Centers employed 1.9 million professionals in 2024, which grew to 2.36 million professionals in 2025.
The report acknowledges that the long-term economic and labor 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 labor capacity, so that the benefits of AI are broadly shared.
“India is one of the top 10 leading emerging-market performers on AI readiness. Harnessing AI as a development tool — not just a technology — could be one of the most powerful levers India has to boost productivity and improve public services.
Through AgriConnect, the World Bank Group is investing in ‘small AI’: targeted, locally-adapted tools that ensure that the gains from AI are accessible and widely shared while workers are supported through the transition.” said Paul Procee, World Bank Acting Country Director for India.
The India Development Update is a companion piece to the World Bank Group’s South Asia Economic Update, which examines economic developments and prospects in the South Asia region. The latest South Asia Economic Update projects that South Asia will grow 6.9% in 2026, retaining its status as the strongest-growing region.
The report also highlights that 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 adoption of AI has the potential to transform South Asia’s development trajectory by boosting labor productivity, expanding export opportunities, and improving public service delivery. But to reap these benefits, governments need to address the foundational gaps that hold back adoption.” said Franziska Ohnsorge, World Bank Group Chief Economist for Asia.
The Update recommends strengthening workforce skills, establishing a more business-enabling environment, and improving the physical and digital infrastructure.
Source: World Bank Media Release
