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Informist, Thursday, Jul. 9, 2026

 

--ADB cuts India FY27 GDP growth forecast by 30 bps to 6.6% 

--ADB retains India FY28 GDP growth forecast at 7.3% 

--ADB raises India FY27 CPI inflation forecast to 5.2% from 4.5?rlier

--ADB retain India FY28 CPI inflation forecast at 4.0%

 

NEW DELHI – The Asian Development Bank Thursday cut its forecast for India's GDP growth in 2026-27 (Apr-Mar) to 6.6% from 6.9% projected in April. It raised the forecast for India's CPI inflation to 5.2% in the current financial year, up 70 basis points from the earlier projection.

 

"Activity remained firm in early 2026, supported by consumption and investment, but higher energy costs, supply disruptions, and tighter financial conditions are expected to dampen growth in the coming months, with effects unwinding only gradually," the bank said in the July release of its Asian Development Outlook.

 

The outlook for both India's growth and inflation for FY28 was retained at 7.3% and 4.0%, respectively, as activity recovers once the pressure eases, the development bank said. Price pressures may ease if the US and Iran – the primary participants in the war along with Israel – durably implement the framework agreements they agreed to in June, the report said. The truce has been called into question after the two countries exchanged strikes over the past few days and US President Donald Trump Wednesday said that to him, the memorandum of understanding was over.

 

ADB's forecast for India's growth in FY27 is in line with the Reserve Bank of India's projection of 6.6%. In June, the central bank had cut India's FY27 growth forecast by 30 bps, reflecting the risks arising from the West Asia war. On Wednesday, the International Monetary Fund also lowered its estimate for India's GDP growth in FY27 by 10 basis points to 6.4%. The Indian economy grew 7.8% in the March quarter and 7.7% in FY26, based on the new GDP series with FY23 as the base year. 

 

Growth in India will be supported by policy interventions to attract more foreign capital, as well as fuel tax cuts, ADB said. The bank also expects targeted credit support, strong services exports, and public capital expenditure to help India to grow at the projected pace. However, the bank sees downside risk to its forecast, driven by heightened geopolitical tensions or weather-induced weakness in agriculture.

 

The West Asia war, which began on Feb. 28, choked the passage of shipments through the Strait of Hormuz, resulting in higher energy prices globally and food inflation. Crude oil prices were at sub-$73 per barrel levels before the war began. Since the outbreak of the war, oil prices have touched as high as $122 per barrel. Currently, oil prices are at $78 per barrel.

 

According to the bank, India is likely to see headline inflation averaging 5.2% in FY27 due to higher oil prices and a weaker rupee. Food inflation will further add pressure to headline inflation with weather conditions and fading of favourable base effects. Factors such as fuel and food prices are seen normalising in FY28, helping inflation moderate to 4.0%, supported by favourable base effects, ADB said. In June, the RBI's Monetary Policy Committee had raised India's headline inflation forecast for FY27 to 5.1% from 4.6% due to the impact of the West Asia war.

 

For developing Asia and the Pacific, ADB has lowered its growth estimates for 2026 to 4.9% from the April projection of 5.1%, because of disruption to energy and supply chains owing to the prolonged West Asia war. However, the bank has maintained its growth forecast for developing Asia and the Pacific in 2027 at 5.1%, reflecting recovering activity as these pressures ease. ADB has cut its South Asia GDP growth projection for 2026 by 30 basis points to 6.0%, largely due to a downward revision to India's forecast, where higher oil and transportation costs weigh on consumer sentiment and private demand, it said.  End

 

US$1 = INR 95.44

 

Reported by Aaryan Khanna and Shweta

Edited by Deepshikha Bhardwaj and Avishek Dutta

 

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