NEW DELHI: India is projected to maintain its position as the world’s fastest-growing major economy, according to a World Bank report.

The World Bank has revised India’s growth forecast for FY26 upward to 6.5%, from 6.3% in June, 2025. This revision reflects strong domestic demand, a solid rural recovery, and the favorable effects of recent tax reforms.

For other South Asian nations, the report presents a more mixed outlook. Bangladesh is expected to grow by 4.8% in FY26, while Bhutan’s forecast has been lowered to 7.3% due to delays in hydropower development, though growth is anticipated to rebound in FY27. The Maldives is projected to experience slower growth at 3.9%, and Nepal’s economy is expected to expand by only 2.1%, weighed down by ongoing political instability and economic uncertainty. In contrast, Sri Lanka's FY26 growth forecast has been raised to 3.5%, thanks to strong performances in tourism and service exports.

Overall, South Asia’s growth is expected to remain solid at 6.6% this year but slow to 5.8% in 2026—0.6 percentage points lower than the previous forecast in April. The report flags several risks to the region's growth, including global economic slowdown, trade policy uncertainty, socio-political instability, and disruptions in the labor market from emerging technologies like artificial intelligence (AI).

“South Asia has immense economic potential and remains the fastest-growing region in the world. However, countries must actively manage the risks that could impede growth,” said Johannes Zutt, World Bank Vice President for South Asia. “By maximizing AI’s potential, reducing trade barriers—especially for intermediate goods—and attracting private investment, countries can boost productivity and create jobs for the rapidly growing workforce.”

The report highlights the need to tap into AI’s potential to improve productivity and income. While South Asia’s workforce currently has limited exposure to AI, young workers with moderate education, especially in business services and IT, are particularly vulnerable to job displacement. Since the launch of ChatGPT, job postings for AI-exposed roles have fallen by about 20% compared to other jobs.

However, AI presents significant opportunities for productivity gains, particularly in areas where it can complement human labor. Job listings show a surge in demand for AI-related skills, with these positions offering wages nearly 30% higher than other professional roles.

To accelerate job creation, the report recommends measures such as simplifying size-dependent regulations that hinder business growth, improving transport and digital infrastructure, increasing housing transparency, enhancing worker skills, and developing safety nets for those impacted by technological changes.