India’s economy is set to grow at 6.7% in the current fiscal year, driven by robust domestic demand, rising rural incomes, and moderating inflation, according to the Asian Development Bank’s (ADB) Asian Development Outlook (ADO) report for April 2025.
ADB forecasts the GDP to continue growing at a pace of 6.8% in FY26 (2026-27), supported by favourable fiscal and monetary policies, news agency PTI reported.
The Reserve Bank of India (RBI) also revised its growth forecast for the current fiscal year, lowering it to 6.5% from the earlier estimate of 6.7%, citing the impact of global trade and policy uncertainties.
Mio Oka, ADB’s Country Director for India, emphasized that the country’s growth remains resilient despite global challenges, driven by infrastructure development and job creation initiatives by the Government of India. “The strengthening of the manufacturing sector, regulatory reforms, a solid services sector, and agriculture, along with the newly announced tax incentives for the middle class, will support India’s economic growth trajectory,” she said.
Consumption is expected to be a significant growth driver, spurred by rising rural incomes and increased demand from the urban middle class and affluent households, aided by reductions in personal income tax rates. Additionally, moderating inflation is anticipated to further bolster consumer confidence, with inflation projected at 4.3% in FY26, before easing slightly to 4% in FY27.
The RBI has already lowered the policy rate twice this year, with a 25 basis point reduction on Wednesday, bringing the repo rate to 6%. The report also suggested that this falling inflation would provide room for further rate cuts despite global uncertainties.
The services sector is expected to remain a key contributor to growth, buoyed by the expansion of business services exports and demand for education and healthcare services. The agriculture sector is anticipated to maintain strong growth, particularly with robust winter crop sowing, including wheat and pulses. The manufacturing sector, which had a slower growth rate in FY25, is expected to pick up momentum.
Investment in urban infrastructure is set to rise, supported by a new government fund with an initial allocation of Rs 100 billion (USD 1.17 billion). While global economic uncertainties may temporarily hinder private investment, the ADB report suggests that lower borrowing costs and planned regulatory reforms could spur investment over time.
However, the report also pointed to near-term growth risks, including the impact of the recent increase in US tariffs on Indian exports and global economic developments that could lead to higher commodity prices. These risks are expected to be mitigated by India’s relatively stable macroeconomic environment.
The ADB noted that the growth projections were finalized before the April 2 announcement of new US tariffs. While the baseline projections do not reflect the latest tariffs, the report includes an analysis of how higher tariffs may affect growth in Asia and the Pacific.
