NEW DELHI: The Asian Development Bank (ADB) on Friday raised India’s gross domestic product (GDP) growth forecast in FY27 by 40 basis points (bps) to 6.9 per cent compared to its December 2025 forecast of 6.5 per cent.
It cited robust domestic reforms, rising consumption and investment, even as it flagged risks from the escalating West Asia conflict that could keep energy prices elevated and weigh on the outlook.
“Rising consumption and investment will drive growth in FY27, supported by favourable policies and structural reforms, while a more benign external environment compared to FY26 will bolster exports,” its April 2026 Asian Development Outlook report added.
In the report, the multilateral lender expected manufacturing and services growth to remain strong, aided by domestic reforms and favourable access to foreign markets under newly-signed trade deals.
Consumption growth is expected to normalise in FY27 as the boost from tax cuts introduced in FY26 dissipates during the course of the year.
Investment is projected to get a fillip from central government’s capital expenditure (capex) budgeted to rise 11.5 per cent in FY27, targeting roads, railways, and green energy initiatives.
Manufacturing and services stand to gain from US tariff reductions on textiles, pharmaceuticals, and electronics, alongside European Union (EU) trade agreements that could unlock preferential access for over $100 billion in annual exports.
By FY28, these tailwinds are reported to intensify. The Manila-based lender pencilled in a further acceleration to 7.3 per cent in FY28, underpinned by domestic structural reforms, emerging benefits from trade pacts with the EU, and anticipated government salary hikes for public sector employees.
“A once-in-a-decade revision of salaries and pensions of central government employees is expected to fuel consumption in FY28,” it added.
For FY26, India’s growth is estimated at 7.6 per cent, up from 7.2 per cent estimated in December 2025.
Yet, the report tempers its India bullishness with stark warnings on West Asia conflict, which choked shipments through the Strait of Hormuz.
“A prolonged conflict in West Asia could undermine India’s macroeconomic performance through multiple channels,” it noted.
Higher global oil prices could put upward pressure on inflation, significantly widen the current account deficit, and weigh on growth by increasing input costs, it said.
“While limited pass-through to domestic fuel prices could cushion the effect on inflation and growth in the near term, it would increase fiscal pressure through higher subsidy requirements,” it said.
It also added that remittances could come under some pressure as economic activity in West Asia, home to a large number of Indian blue-collar workers, is adversely impacted.
On the domestic front, inflation is tipped to climb to 4.5 per cent in FY27 from a benign 2.1 per cent in FY25, driven by food price pressures and oil pass-through, before easing to 4 per cent in FY28 as global commodities stabilise.
“Goods and services tax (GST) rate cuts and a rise in prices of precious metals will push inflation up in the second half of FY27, although precious metals like gold have a lower weight under the new price index. The weakening of the rupee due to widening external imbalances would also put upward pressure on inflation,” it added.
The fiscal deficit is targeted at 4.3 per cent of GDP in FY27 through spending discipline and buoyant tax collections.
The current account deficit is expected to edge up in FY27, before moderating in FY28 on the back of a higher import bill, driven by higher crude and gas prices and a weaker currency.
Source: Business Standard / Millennium Post
