The Asian Development Bank (ADB) on Wednesday lowered India’s growth forecast for FY26 to 6.5% from 6.7% projected in April, on account of trade uncertainty and higher US tariffs that are expected to impact exports and investment.
Despite the revision, India remains one of the fastest-growing major economies in the world, it said.
Growth Forecast
“India is forecast to grow by 6.5% this year and 6.7% next year—down 0.2 and 0.1 percentage points, respectively, from April projections—as trade uncertainty and higher U.S. tariffs affect exports and investment,” according to the Asian Development Outlook (ADO) July 2025.
Despite this, economic activity remains robust, with domestic consumption set to grow strongly on the back of revival of rural demand, it said.
Services and agriculture sectors are expected to be key drivers of growth, the latter supported by a forecast of above-normal monsoon rains, it said.
The central government’s fiscal position remains strong, with higher-than-expected dividends from the Reserve Bank of India, and it is on track to meet the targeted reduction in its fiscal deficit.
Growth in FY27
In FY27, growth is forecast to improve to 6.7% on account of rising investments, under the assumption of reduced policy uncertainty and favorable financial conditions backed by recent reductions of the repo rate and the cash reserve ratio by the monetary authorities.
The baseline expectations of lower crude oil prices will also support economic activity in FY26 and FY27.
The ADB has lowered its growth forecasts for economies in developing Asia and the Pacific this year and next year. The downgrades are driven by expectations of reduced exports amid higher US tariffs and global trade uncertainty, as well as weaker domestic demand.
ADB forecasts the region’s economies will grow by 4.7% this year, a 0.2 percentage point decline from the projection issued in April. The forecast for next year has been lowered to 4.6% from 4.7%.