ADB raises India's growth forecast by 70 bps to 7.2% on consumption boost

ADB has sharply raised India's FY26 growth forecast to 7.2% on stronger consumption post tax cuts, while inflation estimates have been lowered as prices soften and demand strengthens

The Asian Development Bank (ADB) on Wednesday raised India’s growth forecast for the financial year 2026 (FY26) by 70 basis points to 7.2 per cent, citing consumption boost driven by recent tax cuts. 

 

However, its growth projection for FY27 remained unchanged at 6.5 per cent. 

The upward revision by the Manila-based lender comes on the heels of India reporting an impressive 8.2 per cent GDP growth in the second quarter of FY26 (Q2FY26), the fastest in six quarters. 

“India’s GDP grew by 8.2 per cent in the second quarter of the current fiscal (July–September 2025), the fastest in six quarters, supported by robust private consumption despite subdued government spending. The FY26 outlook has been upgraded by 0.7 percentage points to 7.2 per cent, largely due to strong domestic demand aided by recent tax reductions,” said ADB in its latest Asian Development Outlook.

 

 

The ADB revision aligns with improved sentiment among other global institutions as well. The IMF recently praised India’s growth momentum and fiscal discipline, while Fitch Ratings on Thursday lifted its FY26 forecast to 7.4 per cent from 6.9 per cent earlier, citing stronger consumer spending and better sentiment following GST reforms.

 

The bank also lowered its inflation projection for FY26 to 2.6 per cent from 3.1 per cent, noting that inflation could ease further given the Reserve Bank of India’s (RBI’s) even lower estimate of 2.1 per cent.

 

Retail inflation dropped to 0.3 per cent in October, the lowest since the current data series began in 2012.

 

“This decline was driven by GST cuts and a second consecutive month of food price deflation, supported by strong agricultural output and favourable weather,” ADB said.

 

For FY27, it expects inflation to edge up and stabilise near the RBI target at 4.2 per cent.

 

On the exports front, the ADB highlighted the resilience of India’s exports, particularly shipments to the US, buoyed by tariff-free sectors such as smartphones and pharmaceuticals as well as advance shipments in other categories.