THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 9, 2026

The Asian Development Bank (ADB) on Thursday trimmed India's GDP growth forecast for FY2026-27 to 6.6 per cent from the 6.9 per cent projected in April, citing elevated global energy prices triggered by the Middle East conflict. Despite the downward revision, India is expected to retain its position as the world's fastest-growing major economy.

In its Asian Development Outlook (ADO) July 2026, the multilateral lender said higher crude oil prices are expected to squeeze household incomes and weigh on economic activity during the current fiscal year.

"The FY2026 forecast is lowered from 6.9 per cent projected in April, reflecting elevated energy prices, which squeeze real incomes," the ADB said.

However, it noted that growth will continue to be supported by government measures aimed at attracting foreign investment, fuel tax reductions, targeted credit support, robust services exports and sustained public capital expenditure.

The ADB retained India's GDP growth projection for FY2027-28 at 7.3 per cent, saying improved global conditions and stronger export competitiveness, aided by trade agreements with key partners, would provide momentum to the economy.

The lender, however, warned that risks remain tilted to the downside, with heightened geopolitical tensions and weather-related disruptions to agriculture posing significant challenges.

Alongside the growth downgrade, the ADB sharply revised India's inflation forecast upward to 5.2 per cent for FY2026-27 from 4.5 per cent estimated in April.

According to the report, higher global energy prices resulting from the Middle East conflict are expected to push up fuel, transport and food costs. A weaker rupee, heatwave-induced pressure on food prices and the fading impact of favourable base effects are also likely to keep inflation elevated.

The inflation forecast for FY2027-28 has been retained at 4 per cent, with the ADB expecting fuel and food prices to gradually stabilise.

The revised projections broadly mirror the Reserve Bank of India's latest assessment. Last month, the RBI lowered its GDP growth forecast for FY2026-27 to 6.6 per cent from 6.9 per cent, while increasing its inflation estimate to 5.1 per cent from 4.6 per cent.

The ADB also lowered its growth outlook for developing Asia and the Pacific to 4.9 per cent in 2026 from 5.5 per cent in 2025, citing prolonged disruptions in global energy markets caused by the Middle East conflict. This marks a reduction of 0.2 percentage points from its April forecast.

The regional growth estimate for 2027 remains unchanged at 5.1 per cent, reflecting expectations of a gradual recovery as energy market pressures ease.

The report cautioned that although a framework agreement signed in June could help stabilise global energy markets, disruptions are likely to unwind only gradually. Rising costs of fertilisers, other commodities and persistent supply-chain bottlenecks are expected to keep inflationary pressures elevated across the region.

Regional inflation is now projected at 4.3 per cent in 2026, compared with 3 per cent in 2025, representing an upward revision of 0.7 percentage points from April. The inflation forecast for 2027 has been maintained at 3.4 per cent.

Meanwhile, the International Monetary Fund (IMF), in its latest update to the World Economic Outlook, projected India's economy to grow 6.4 per cent in FY2026-27, marginally lower than the 6.5 per cent forecast made in April. It, however, raised its FY2027-28 growth estimate to 6.7 per cent from 6.5 per cent.

"India remains among the fastest-growing major economies, with growth projected at 6.4 per cent, supported by strong momentum in private consumption and services activity," the IMF said.

Explaining the revised outlook, IMF Division Chief Deniz Igan said stronger-than-expected recent economic data and resilient high-frequency indicators through April had partly offset global headwinds, helping sustain India's growth momentum despite external uncertainties.