ADB cuts India's FY27 GDP growth forecast to 6.6%, cites West Asia tensions

The Asian Development Bank lowered India's FY27 growth forecast to 6.6 per cent, citing higher energy prices amid West Asia tensions, while retaining its FY28 projection at 7.3 per cent

Citing concerns over higher energy prices amid tensions in West Asia, the Asian Development Bank (ADB) has lowered India's GDP growth projection for FY27 by 30 basis points to 6.6 per cent. It has maintained its FY28 growth forecast for India at 7.3 per cent.

 

"The FY2026 (2026-27) forecast is lowered from 6.9 per cent projected in April, reflecting elevated energy prices, which squeeze real incomes. Growth will be supported by policy interventions to attract more foreign capital, as well as fuel tax cuts, targeted credit support, strong services exports, and public capital expenditure," the multilateral agency said in the latest edition of its Asian Development Outlook.

 

 

Following US President Donald Trump's warning of more strikes on Iran this week, the price of Brent crude has surged back closer to $80 a barrel from around $70 a barrel last week.

 

Meanwhile, the Indian government has implemented several policy measures since March to insulate the domestic economy from external headwinds. The Indian economy grew 7.7 per cent in FY26, according to the Ministry of Statistics and Programme Implementation.

 

Despite the reduction in the estimate by ADB, India's GDP is poised to grow at the fastest pace in FY27 and FY28 compared with other Asian economies.

 

ADB expects global conditions to improve going ahead and has left its projection for FY28 unchanged. India's export competitiveness is also likely to get a boost following the rollout of free trade agreements with various partners, the agency pointed out. India is expected to implement at least two more FTAs in the current year. "However, risks tilt to the downside, driven by heightened geopolitical tensions or weather-induced weakness in agriculture," ADB said in its report.

 

The India Meteorological Department has forecast a below-normal monsoon for 2026, projecting rainfall at 90 per cent of the long-period average because of El Niño conditions.

 

Accounting for heatwaves, higher oil prices and a weaker rupee, ADB has also raised its retail inflation projection for India by 70 basis points to 5.2 per cent for FY27.

 

"India's FY2026 (2026-27) inflation forecast is revised up to 5.2 per cent, driven by higher oil prices and a weaker rupee, with food inflation adding further pressure from heatwaves and the fading of favourable base effects," the report said.

 

While ADB's growth projection for India is in line with that of the Reserve Bank of India (RBI), its inflation forecast is marginally higher than the 5.1 per cent projected by the central bank for the current financial year.

 

The agency has retained its inflation forecast for FY28 at 4.0 per cent, as fuel and food prices are expected to normalise, supported by favourable base effects.