ADB said the moderation in growth is on account of heightened global uncertainty due to the West Asia conflict, higher energy prices and volatile trade and financial conditions.

The Asian Development Bank (ADB) projects India’s gross domestic product growth will ease to 6.9% in the current fiscal year from 7.6% in the previous year before accelerating to 7.3% in the next fiscal.

The estimate is still higher than the bank’s previous forecast of 6.5% growth for the current fiscal year. ADB refers to the year ending 31 March 2027 as FY2026.

According to the Asian Development Outlook (ADO) April 2026 released on Friday, the growth forecasts are informed by assumptions finalized on 10 March under exceptionally high uncertainty, envisaging an early stabilization scenario for the conflict in West Asia. Evidence since then points to a higher likelihood of more persistent disruptions, it said.

ADB said the moderation in growth is on account of heightened global uncertainty due to the West Asia conflict, higher energy prices and volatile trade and financial conditions. These external pressures are likely to weigh on exports, inflation and capital flows in the near term.

Growth is expected to pick up in FY2027 (the year ending 31 March 2028), supported by strong domestic demand, continued public investment and an improving external environment, it said.

The ADB’s growth forecast for India is in line with that of the Reserve Bank of India, which expects GDP to expand 6.9% this fiscal. The World Bank has pegged India’s GDP growth at 6.6% this fiscal year.

“Despite external challenges, India’s growth outlook remains resilient, aided by supportive fiscal and monetary policies and regulatory reforms aimed at enhancing labour flexibility and integration with global value chains,” ADB country director for India Mio Oka said. “Over the medium term, investments in clean energy, power sector reforms and measures to boost manufacturing competitiveness and attract investment will sustain growth.”

Price rise

ADB has projected India’s inflation will accelerate to 4.5% in FY2026, reflecting higher food and energy prices, before moderating to 4% in FY2027 as supply conditions improve.

The current account deficit is expected to widen in FY2026 due to higher imports, particularly of crude oil, before narrowing in FY2027 due to an expected normalization of global energy markets and strengthened exports reflecting recent trade agreements with key partners, including the European Union, the US and New Zealand.

On the supply side, manufacturing and services growth is expected to remain strong, ADB said. Manufacturing will benefit from recent trade agreements as well as key support measures outlined in the budget for semiconductors, electronic components and rare earths. Services will continue to be supported by the expansion of global capability centres and robust demand for high-value business services, it said.

ADB expects domestic demand will remain the main driver of growth during FY2026 and FY2027. It said private consumption is likely to remain strong in FY2026, supported by rising real incomes, steady rural demand and easing monetary conditions, although the waning impact of earlier tax cuts and increasing inflation could moderate its pace.

Private consumption is expected to strengthen in FY2027, aided by an expected once-in-a-decade revision in government salaries and pensions, the multilateral development bank said.

ADB endorsed India’s investment-led growth strategy, projecting a robust investment environment backed by the Central government’s capital expenditure, which is budgeted to rise by 11.5% in FY2026. It said that supportive monetary policy, regulatory reforms, improved logistics and healthier corporate and banking sector balance sheets are expected to foster private investment momentum.

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