ADB cuts India’s FY27 growth forecast to 6.6%

In its July Asian Development Outlook, the multilateral lender said the revised outlook reflects elevated energy prices, which squeeze real incomes, affecting household spending and overall economic activity.

“Growth will be supported by policy interventions to attract more foreign capital, as well as fuel tax cuts, targeted credit support, strong services exports, and public capital expenditure,” it said.

The FY28 growth forecast remains unchanged from April, underpinned by improved global conditions and export competitiveness gained through trade agreements with various partners.

“However, risks tilt to the downside, driven by heightened geopolitical tensions or weather-induced weakness in agriculture,” it said.

Despite the downgrade, ADB expects growth to be supported by policy interventions to attract foreign capital, fuel tax cuts, targeted credit support, strong services exports and continued public capital expenditure. It said the FY2027 forecast remains unchanged, “underpinned by improved global conditions and export competitiveness gained through trade agreements with various partners.”

The lender also revised up India’s FY27 inflation forecast to 5.2%, driven by higher oil prices and a weaker rupee, with food inflation adding further pressure from heatwaves and fading of favorable base effects. The FY28 forecast is retained at 4.0% as fuel and food prices normalize, supported by favourable base effects.

Wholesale price inflation in India recorded an even steeper increase to 9.7% in May, a 43-month peak.

On Wednesday, the International Monetary Fund (IMF) lowered India’s growth forecast by 10 bps to 6.4% for FY27 but said it remains among the fastest-growing major economies, supported by strong momentum in private consumption and services activity.

However, the IMF raised its FY28 growth forecast by 20 bps to 6.7%, up from its April forecast of 6.5%.