The Asian Development Bank (ADB) on Friday upgraded its forecast for India’s gross domestic product (GDP) growth in FY2026-27 (FY27) by 80 basis points to 7.3 per cent compared with its December 2025 forecast of 6.5 per cent, citing robust domestic reforms, new trade agreements with the European Union, and anticipated government salary hikes that will bolster household spending amid a resilient economic backdrop.
In its April 2026 Asian Development Outlook, the multilateral lender said India is expected to remain one of the fastest-growing major economies, supported by strong private consumption, public infrastructure spending, and improving corporate balance sheets.
However, it cautioned that escalating geopolitical tensions, such as the ongoing conflict in the West Asia, pose downside risks through higher energy prices, tighter financial conditions, and weaker external demand.
“Growth in FY2027 improves markedly as domestic demand strengthens due to hikes in salaries/pensions of government employees and an uptick in investment benefitting from key regulatory reforms. External demand is expected to strengthen as the benefits from the trade deal with the European Union (EU) boost exports,” noted the report.
The upgrade underscored sustained momentum from private consumption, public infrastructure spending, and improving corporate balance sheets despite external pressures such as elevated oil prices from the West Asia conflict.
For FY2025-26 (FY26), India’s growth is estimated at 6.9 per cent, down from 7.2 per cent estimated in December 2025, as global headwinds and fading export momentum weigh on activity.
The upgrade underscores confidence in easing monetary conditions, including 125 basis points of Reserve Bank of India (RBI) policy rate cuts delivered in 2025 to stimulate credit expansion and consumer durables spending. Private consumption, a key pillar, is expected to normalise after last year’s tax-cut boost, though food and petroleum inflation may moderate gains.
On inflation, prices are forecast to rise to 4.5 per cent in FY26 before easing to 4.0 per cent in FY27, pressured by higher crude and gas imports, a softer rupee, and demand from salary-pension revisions for central government employees.
The current account deficit is projected to widen modestly in FY26 due to pricier energy imports and slower West Asia remittances, narrowing in FY27 as oil stabilises and export gains emerge, buffered by $728.5 billion in foreign exchange reserves.
“The impetus to consumption from the hike in salaries and pensions of central government workers would add to inflationary pressure in FY27, but this effect will be tempered by lower expected crude oil prices. Inflation is thus forecast to decline to 4.0 per cent in FY2027,” the bank added.
Risks persist from a prolonged West Asia conflict, the report warns, which could spike oil costs, disrupt supply chains, curb remittances, and dent growth through higher inflation and external imbalances. Still, India’s services sector (up 9.0 per cent in FY2025) and manufacturing rebound provide broad-based support.
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