ADB cuts India's FY27 growth forecast to 6.6%, raises inflation outlook to 5.2%

The Asian Development Bank has lowered India's economic growth forecast for FY26-27 to 6.6% from the 6.9% projected in April, citing elevated oil prices and higher transportation costs that are weighing on consumer sentiment and private demand. Despite the downward revision, the ADB's latest forecast remains above the International Monetary Fund's estimate of 6.4% growth for FY27.

India likely to remain one of the world's fastest-growing economies

In the July edition of its Asian Development Outlook, the multilateral lender said India is expected to remain one of the world's fastest-growing major economies, although elevated energy prices are eroding household purchasing power and dampening private consumption.

The ADB also raised its inflation forecast for India for FY27 to 5.2%, up from the 4.5% projected in April, reflecting higher energy and food prices. Its inflation estimate for FY28 was left unchanged at 4%.

At the regional level, the ADB lowered its growth forecast for South Asia to 6.0% for 2026 from 6.3% projected earlier, citing rising oil prices, higher freight costs and uncertainty over remittance flows.

Outlook for Asia and the Pacific

The lender also revised down its outlook for developing Asia and the Pacific, projecting economic growth of 4.9% in 2026, compared with 5.5% in 2025. The latest estimate is 0.2 percentage points lower than its April forecast.

According to the ADB, prolonged disruptions in global energy markets stemming from the Middle East conflict have weighed more heavily on the region's economic prospects than previously anticipated. However, it retained its 2027 regional growth forecast at 5.1%, expecting activity to recover as these pressures gradually ease.

The report said disruptions in global energy markets are likely to unwind only gradually despite a framework agreement reached in June. It noted that the impact has spread beyond energy to fertilisers, other commodities and supply chains, keeping inflationary pressures elevated across the region.

The ADB now expects inflation in developing Asia and the Pacific to average 4.3% in 2026, compared with 3% in 2025. The latest forecast is 0.7 percentage points higher than its April estimate while the inflation projection for 2027 remains unchanged at 3.4%.