ADB revises India GDP forecast downward
The Asian Development Bank (ADB) on Thursday reduced India's GDP growth projection for the current fiscal year (FY2026, ending March 31, 2027) from 6.9% to 6.6%, according to its Asian Development Outlook (ADO) July 2026 report. The revision is attributed to concerns over rising energy prices stemming from the ongoing West Asia crisis, which is squeezing real incomes.
Despite the slowdown, India remains the fastest-growing major economy globally. The ADB kept its FY2027 growth forecast unchanged at 7.3%, supported by improving global conditions and export competitiveness from trade agreements.
Inflation forecast raised sharply
The ADB significantly increased its inflation projection for India in FY2026 from 4.5% (April estimate) to 5.2%. The report states: “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 inflation forecast is revised up to 5.2%, driven by higher oil prices and a weaker rupee, with food inflation adding further pressure from heatwaves and fading of favourable base effects.”
For FY2028, the inflation estimate remains at 4%, assuming normalization of fuel and food costs and favorable base effects.
Policy support and risks
The ADB noted that growth will be supported by policy interventions to attract foreign capital, fuel tax cuts, targeted credit support, strong services exports, and public capital expenditure. However, downside risks include increased geopolitical tensions or agricultural challenges from adverse weather.
The Reserve Bank of India (RBI) had also last month lowered its GDP growth estimate for FY27 from 6.9% to 6.6%, while raising its inflation projection from 4.6% to 5.1%.
Regional outlook downgraded
The ADB reduced its growth estimate for developing economies in Asia and the Pacific to 4.9% in 2026, down from 5.5% in 2025 and 0.2 percentage points lower than April projections. “Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region's prospects than anticipated,” the report stated.
The report anticipates that disruptions to global energy markets will only gradually ease despite a framework deal agreed in June, with inflationary pressures expected to persist beyond energy to fertilizers, other commodity prices, and supply chains.
