Despite a worsening global economic and geopolitical environment, it said, growth in India is forecast to remain robust at 6.9% in FY26. The economic activity is set to be underpinned by strong domestic demand, supported by easing financing conditions and lower US tariffs on Indian goods.
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This comes two days after the Reserve Bank of India (RBI) estimated real GDP growth for FY26 at 7.6%, signalling strong domestic demand despite persistent global trade risks and financial market uncertainty.
The ongoing war in the Middle East has amplified global geopolitical risks, disrupting supply chains and causing price hikes. In its Asian Development Outlook report, ADB warned that more persistent disruptions would push energy prices even higher, raising inflation and weighing further on growth across the region. The Middle East war could also hit the credit market as an abrupt tightening in global financial conditions could raise borrowing costs.
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For FY27, ADB projected India’s growth to rise to 7.3 per cent, driven by domestic reforms, the effects of trade agreements with the European Union, and expected government salary increases. RBI projected a slower GDP expansion at 6.9% for FY27.
In the outlook report released in December 2025, ADB had projected India’s GDP growth at 6.5 per cent for FY27.
On the inflation front, ADB has projected more than a double rise from 2.1% in FY25 to 4.5% in FY26, driven by rebound in food prices from earlier declines, higher global oil prices, currency weakness, and rising precious metal prices. The inflation is further expected to ease to 4.0% in FY27 on account of lower oil prices.