ADB cuts India's growth rate forecast to 6.7 % in FY 26

The Asian Development Bank (ADB) has revised its growth rate forecast for India for fiscal year 2026 (ending March 31, 2026) to 6.7%. The ADB has forecasted a growth rate of 6.8% for fiscal year 2026-27.

Reserve Bank of India in its April 2025 Monetary Policy has also reduced the expected growth rate of the indian economy in 2025-26 to 6.5% from the earlier forecast of 6.7% due to an uncertain global outlook as a result of reciprocal tariffs imposed by the American President Donald Trump on its trading partners including India.

The ADB released its latest forecast on the Indian economy in the April 2025 edition of the Asian Development Outlook report. 

Indian economy to show resilient growth 

According to the ADB report, despite global uncertainty, the Indian economy remains resilient in its growth. The report has identified several positive factors in the Indian economy that will help sustain India's growth in the near future.

Cut in personal Income Tax

• The cut in personal income tax announced in the Union Budget 2025-26 is expected to increase consumption among urban middle-class and affluent households, thereby boosting demand for goods and services.

Moderate inflation rate 

• The report anticipates that the inflation rate will remain at 4.3%, with a subsequent decline to 4.0%. The prospect of moderate inflation is expected to boost consumer spending.

Strong Service Sector Growth  

• The report expects the service sector to be a strong growth driver, driven by expansion in business services exports, education, and health services. 

Investment in Infrastructure 

• The central government's announcement to invest around Rs 100 billion in the urban infrastructure sector will also boost the country's growth rate.

Agriculture 

• The agricultural sector is also expected to show strong growth, with a good sowing of the wheat crop during the Rabi season and a prospect of a normal monsoon during the Kharif season. 
• The resultant increase in rural income will also boost consumption in the economy. 

Challenges 

The report anticipates a challenging global outlook, given the steep tariffs imposed by the Trump administration of the United States. However, the administration has postponed the tariff hike for 90 days.

This will adversely affect Indian exports.

However, the report expects the Indian economy to absorb some of these risks due to its inherent strength. 

About ADB 

The Asian Development Bank (ADB) is a multilateral development bank with a focus on the Pacific region.

It was established in 1966 and has 69 members, of whom 49 are from the Asia-Pacific region.