Asian Development Bank (ADB) has cut India’s GDP growth forecast for FY2026 to 6.6% from 6.9%, citing higher energy prices due to the Middle East crisis. Despite the moderation, India remains the fastest-growing major economy.
New Delhi: Asian Development Bank on Thursday lowered India’s GDP growth projection to 6.6 per cent as against 6.9 per cent estimated earlier for the current fiscal on concerns of higher energy prices fuelled by the Middle East crisis.
Despite the growth moderation, India still continues to be the fastest-growing major economy in the world.
India’s GDP growth forecasts are revised down to 6.6 per cent for FY2026 (ending 31 March 2027) and maintained at 7.3 per cent for FY2027, Asian Development Outlook (ADO) July 2026 said.
“The FY2026 (2026-27) forecast is lowered from 6.9 per cent projected in April, reflecting elevated energy prices, which squeeze real incomes.
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 FY2027 growth forecast remains unchanged from April, underpinned by improved global conditions and export competitiveness gained through trade agreements with various partners, it said.
However, it said, risks tilt to the downside, driven by heightened geopolitical tensions or weather-induced weakness in agriculture.
With regard to inflation, the latest ADO has raised its inflation forecast sharply to 5.2 per cent from 4.5 per cent projected in April.
“Upward revisions reflect higher global energy prices from the Middle East conflict feeding through to fuel, transport, and food costs across the subregion. India’s FY2026 (2026-27) inflation forecast is revised up to 5.2 per cent, driven by higher oil prices and a weaker rupee, with food inflation adding further pressure from heatwaves and fading of favourable base effects,” it said.
The FY28 forecast is retained at 4 per cent as fuel and food prices normalise, supported by favourable base effects, it said.
Last month, RBI too revised down its GDP growth forecast for FY27 to 6.6 per cent from 6.9 per cent, while raising its inflation projection to 5.1 per cent from 4.6 per cent.
The ADO has also lowered its growth forecast for developing Asia and the Pacific economies to 4.9 per cent for 2026 compared to 5.5 per cent growth in 2025.
“This is a reduction of 0.2 percentage points from April projections. Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region’s prospects than anticipated,” it said.
The 2027 growth forecast is maintained at 5.1 per cent, reflecting recovering activity as these pressures ease, it said.
ADO expects disruptions to global energy markets to unwind only gradually, despite a framework agreement signed in June. With impacts extending beyond energy to fertilizers, other commodity prices, and supply chains, inflationary pressures are likely to persist.
Regional inflation is now forecast at 4.3 per cent this year compared to 3 per cent in 2025 – an upward revision of 0.7 percentage points from April.
The inflation forecast for 2027 remains at 3.4 per cent, it said.
According to the IMF, the Indian economy is expected to grow at 6.4 per cent in fiscal year 2027, a tad slower than the 6.5 per cent projected in April.
The IMF, in its update to the World Economic Outlook (WEO), projected India to grow at 6.7 per cent in fiscal year 2028, an increase of 20 basis points from the 6.5 per cent growth projected in April.
“India remains among the fastest growing major economies, with growth projected at 6.4 per cent supported by strong momentum in private consumption and services activity,” the IMF said on Wednesday.
“Factors that are underpinning the forecast revisions are basically twofold. On the upside, we have the better-than-expected outcome in the most recent data, but we also have high-frequency indicators through April showing quite a bit of resilience in overall economic activity,” Deniz Igan, Division Chief (World Economic Studies), said.
