The Asian Development Bank (ADB) on Friday projected India’s GDP growth to remain robust at 6.9% in FY26-27, with an acceleration to 7.3% in the following fiscal, driven by strong domestic demand and supported by easing financing conditions and lower US tariffs on Indian goods. 

In its Asian Development Outlook report, ADB cautioned that a prolonged conflict in the West Asia could pose risks to India’s macroeconomic stability through higher energy prices, trade disruptions, and weaker remittance inflows, given the region’s significance to India’s external sector. 

Inflation may rise sharply

The multilateral lender expects inflation to rise sharply to 4.5% in FY27 from 2.1% in FY26, citing a rebound in food prices, elevated global crude oil prices, currency weakness, and higher precious metal prices. Inflation is projected to moderate to 4% in FY28 on the back of easing oil prices. 

India’s economy grew 7.6% in FY25-26, up from 7.1% in the previous year, supported by resilient household consumption amid tax cuts, softer food prices, and steady public investment. 

“Despite a worsening global economic and geopolitical environment, growth in India is forecast to remain robust at 6.9% in fiscal year 2026-27,” ADB said, adding that domestic demand will continue to anchor economic activity. 

Growth is expected to strengthen further

Growth is expected to strengthen further to 7.3% in FY27-28, aided by domestic reforms, potential trade agreements with the European Union, and anticipated increases in government salaries. 

ADB had earlier projected a lower growth rate of 6.5% for FY27 in its December 2025 outlook, indicating an upward revision in its latest assessment. 

While rising inflation, particularly in food and fuel, may weigh on private consumption in the near term, the report noted that growth in FY28 is likely to improve as domestic demand strengthens, supported by higher government spending and a pickup in investment following key regulatory reforms. 

External demand is also expected to benefit from prospective trade agreements with the European Union, boosting exports. 

However, ADB warned that sustained high global oil prices due to Middle East tensions could widen the current account deficit, increase input costs, and exert pressure on growth. It added that while limited pass-through of higher crude prices could cushion inflation in the short term, it may strain government finances through higher subsidy burdens.