World Bank sees South Asia growing 6.9% this year; 23% of Indian firms use AI, against 43% in the US

The World Bank now expects South Asia to grow 6.9% this year, better than it had projected earlier, and 6.7% in 2027. The forecast comes from the South Asia Economic Update, titled Adopting AI for Growth, which the Bank released on 6 October 2026. It is the regional outlook the Bank publishes twice a year.

For readers in India and across the diaspora, two points stand out. The region is holding up well against global shocks, and the report says Indian firms are still well behind American ones in using artificial intelligence.

What the World Bank says about growth

The Bank links the strong 2026 figure to robust domestic demand, which in turn rests on strong remittance inflows and recent structural reforms. That matters for families who send money home, because remittances are named as one of the supports of regional demand.

Growth is then projected to ease to 6.7% in 2027 as headwinds build. The report points to three risks. Energy prices that stay high could push inflation up and tighten financial conditions. A severe El Niño could hurt farm output and food security. And a sharp reversal in global AI investment could cause financial strains.

Those are risks, not forecasts of what will happen. The Bank lists them as the things that could pull the outlook down, and it attributes the whole outlook to its own analysis.

The AI gap

The report's main theme is whether AI can become a new source of growth. According to the World Bank, around 23% of Indian firms report using AI, compared with 43% in the United States. It adds that the gap is wider for more sophisticated uses.

The Bank says adoption is rising across South Asia but is still well behind advanced economies. It also says AI is accelerating and that firms are using it to find new market opportunities. Analysis of recent data, it says, shows AI is widening opportunities through global value chain links for South Asian suppliers that are heavily exposed to AI.

A second area the report looks at is public services. Governments are starting to use AI in health, education and agriculture, where skilled staff are scarce. The examples it gives include AI based weather forecasts sent to smallholder farmers in India and AI assisted retinal screening in Bangladesh.

The report adds a caution. It says the gains from these tools depend on tailoring them to local conditions, including small AI applications that run on basic devices and limited connectivity.

The report also stresses that the benefits will not arrive on their own. It says public investment, clearer rules and attention to small businesses are needed so that AI helps workers and firms across the region rather than only the largest companies.

What it recommends

Johannes Zutt, the World Bank's Vice President for South Asia, said the region has shown remarkable resilience but needs new drivers of growth to keep momentum and create more jobs. He said countries should invest in the skills, infrastructure and enabling environment that let workers and businesses use AI.

Franziska Ohnsorge, the Bank Group's Chief Economist for Asia, said AI could boost labour productivity, expand export opportunities and improve public service delivery. She added that governments must first fix the foundational gaps that hold back adoption.

The recommended policy steps are to strengthen workforce skills, build a more business friendly environment and improve physical and digital infrastructure. The report also calls for measures that lower barriers to AI adoption by small firms, support local AI innovation, and set a clear regulatory framework that reduces uncertainty and protects data security and privacy.

Where this fits

The World Bank's regional view lands in a busy week for economic data. The Reserve Bank of India's latest policy statement also looked at the global backdrop, including oil prices and non resident deposits, and India has recently signed a statement on excess capacity covering EVs, batteries, solar and chips.

Anyone who wants the country tables can read the full report on the World Bank's website. All figures in this article are the World Bank's own, as published on 6 October 2026. This is information, not advice.