The Asian Development Bank (ADB) has revised India’s GDP growth forecast for the financial year 2025 – 26 (FY26) downward to 6.5%, from its earlier estimate of 6.7% made in April. The cut, outlined in ADB’s July 2025 Asian Development Outlook, is primarily attributed to the negative impact of baseline US tariffs and the uncertainty surrounding global trade policy. ADB stated that in addition to slower global growth and direct effects of additional US tariffs on Indian exports, rising policy uncertainty could dampen investment flows.
Despite these headwinds, India is expected to remain one of the fastest-growing major economies globally. The report highlighted that economic activity continues to show resilience, with domestic consumption projected to grow strongly, supported by a revival in rural demand. The Indian Ministry of Finance, in its May 2025 monthly economic review, echoed a similar sentiment of cautious optimism. It noted that the momentum seen in FY25, driven by robust private consumption and strong performance in the services sector has carried into the initial months of FY26, though some segments, such as automobile sales, are beginning to show signs of moderation.
ADB anticipates that services and agriculture will be the primary drivers of growth. The agricultural sector, in particular, is expected to benefit from a forecast of above-normal monsoon rains, which should help reduce food prices. As a result, ADB has also revised its inflation forecast for FY26 down to 3.8%, reflecting a faster-than-expected drop in food prices due to improved agricultural output. The Reserve Bank of India has similarly lowered its retail inflation projection for FY26 to 3.7%. ADB’s inflation forecast for FY27 remains unchanged.
Looking ahead, India’s GDP growth for FY27 has been marginally revised to 6.7%, down from the earlier estimate of 6.8%. However, this slight dip is accompanied by a more favorable outlook compared to FY26. ADB attributes this to rising investments, assuming a decline in policy uncertainty. Growth is also expected to be supported by accommodative monetary conditions, including recent reductions in the repo rate and the cash reserve ratio by the central bank.
Other institutions have presented a mixed outlook. The World Bank, in its Global Economic Prospects report released in June, maintained India’s FY26 growth forecast at 6.3%, citing the negative effects of global trade barriers and subdued demand from key trading partners. Meanwhile, S&P Global Ratings recently upgraded its projection for India’s FY26 growth to 6.5%, supported by expectations of a normal monsoon, lower crude oil prices, income tax relief, and monetary easing.