India's economic growth forecast for FY27

ADB lowers India's economic growth forecast for FY27

Asia Development Bank lowers India's growth forecast for FY27 by 20 basis points to 6.5 percentThe Asian Development Bank (ADB) has lowered India's growth forecast for FY27 by 20 basis points to 6.5 percent. The US expects a significant tariff hike to adversely impact exports and manufacturing growth. The multilateral organization has kept its FY26 growth forecast unchanged, which it had revised in July.

In its Asian Development Outlook (ADO), released in September, ADB stated, "India faces the largest tariff increase among Asia's growing economies. This has contributed to a downward trend in the growth outlook. The tariff hike could have a significant adverse impact on key export sectors such as textiles, ready-made garments, jewelry, shrimp, and chemicals."

The Manila-based multinational lender stated that the imposition of tariffs would adversely impact India's exports. This will lead to a decline in India's GDP in FY26 and FY27. "This will result in a decline in net exports compared to the April forecast," it said. It added that risks to the outlook could be both higher and lower depending on the nature of bilateral trade between India and the US.

On the upside, India's growth could accelerate if the US imposes lower tariffs on India compared to countries in the Asia-Pacific region. On the downside, further escalation of trade tensions could impact other sectors of the economy. Geopolitical tensions could further reduce demand for India's exports by increasing global commodity prices.
On the inflation front, it expects consumer prices to grow at 3.1 percent in FY26, lower than the 3.8 percent estimated in July. However, it has raised its FY27 forecast to 4.2 percent from the previous 4 percent, anticipating normalization of food prices.

However, the ADB indicated that consumer consumption in India is projected to increase, particularly in rural areas. Furthermore, consumption will be boosted by fiscal measures such as reductions in individual income taxes, reductions in the Goods and Services Tax (GST), and salary increases for central government employees following the implementation of the 8th Pay Commission.