ADB Slashes India's FY26 Growth Forecast to 6.5% Over US Tariffs Concern

The Asian Development Bank (ADB) has lowered India’s growth forecast for FY26 to 6.5%, down from 6.7% projected in April. The revision comes in light of global trade uncertainty and increased US tariffs, which are likely to impact exports and investment flows.

For FY27, ADB now expects India to grow at 6.7%, slightly below its earlier estimate of 6.8%. The projection assumes improved financial conditions, lower policy uncertainty, and recent reductions in repo and cash reserve ratios by the central bank.

Domestic Demand and Sector Growth

ADB expects domestic consumption to remain strong, supported by a revival in rural demand. Services and agriculture are identified as key contributors to growth, with the latter benefiting from forecasts of above-normal monsoon rains.

The central government’s fiscal position remains stable, helped by a record ₹2.69 trillion surplus transfer from the RBI. ADB notes that the government is on track to meet its fiscal deficit targets, aided by higher-than-expected dividend receipts.

India’s inflation forecast for FY26 has been cut to 3.8%, largely due to falling food prices and better agricultural output. Lower crude oil prices are also expected to support economic activity in the coming quarters.

Other Forecasts

India Ratings has also revised its FY26 growth forecast to 6.3% from 6.6%. The World Bank projects 6.3%, while the IMF estimates 6.2% for the same period. The Ministry of Finance has set a broader range of 6.3% to 6.8%.

Regional Growth 

ADB has also lowered its growth outlook for Asia and the Pacific. The region is expected to grow at 4.7% in 2025 and 4.6% in 2026, citing weak exports, higher tariffs, and softer domestic demand across several economies.

Read More: RBI Drives PSB NPA Reduction to 2.58% in 2025 from 9.11% in 2021!

Conclusion

India’s growth outlook remains resilient but moderated. The revised forecast shows current external pressures, particularly trade-related challenges, even as domestic drivers continue to hold steady.

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