However, this marks a moderation from the projected 7.6% growth in FY26, amid rising global uncertainty, due to the Middle East conflict. Higher energy prices and volatile trade and financial conditions are expected to weigh on exports, inflation, and capital flows in the near term, it said.
ADB expects growth to pick up to 7.3% in FY28, driven by private consumption, supported in part by anticipated revisions to government salaries and pensions, along with continued public investment and a more favourable external environment.
The Reserve Bank of India (RBI) projected FY27 growth at 6.9%, while the World Bank on Wednesday raised its estimate to 6.6% from 6.3%.
“Despite external challenges, India’s growth outlook remains resilient, aided by supportive fiscal and monetary policies and regulatory reforms aimed at enhancing labor flexibility and integration with global value chains,” said Mio Oka, ADB country director for India.
She added that over the medium term, growth will be sustained by investments in clean energy, reforms in power sector, and measures to boost manufacturing competitiveness and attract investment.
Consumption is expected remain the primary growth driver in FY27, backed by rising real incomes, while private investment is likely to stay robust due to supportive monetary policy and regulatory reforms, said ADB.On the supply side, it noted that the manufacturing sector stands to gain significantly from recent trade agreements with the European Union, the United States, and New Zealand.
Inflation is projected to rise to 4.5% in FY27 due to higher food and energy prices, before easing to 4% in FY28 as supply conditions improve, according to ADB.
The current account deficit is also expected to widen in FY27, driven by higher imports, especially crude oil, but is likely to narrow in FY28 as global energy markets stabilise and exports strengthen, supported by recent trade agreements.
Highlighting policy challenges, ADB emphasised the need for an integrated social protection framework to reduce duplication and improve targeting. It also said that subsidy efficiency could be enhanced without weakening social protection by expanding direct benefit transfers linked to verified beneficiary identities.