What’s Next for India’s Economy? ADB Predicts Growth Amid Global Challenges

The Asian Development Bank (ADB) has projected India's GDP growth to remain strong at 6.9% for the current fiscal year, with an increase to 7.3% in the next. However, ongoing conflicts in the Middle East pose significant risks to this outlook, potentially affecting energy prices and trade flows. Inflation is expected to rise due to various factors, including food prices and global oil costs. The ADB emphasizes the need for sound macroeconomic policies to sustain growth and manage inflation effectively. As India navigates these challenges, the focus will be on maintaining fiscal discipline while supporting vulnerable populations.

By Narendra Chaudhary Apr 10, 2026, 17:10 IST

ADB's Growth Forecast for India

New Delhi: The Asian Development Bank (ADB) has forecasted that India's GDP growth will remain strong at 6.9% for the current fiscal year, with an anticipated increase to 7.3% in the following year. This growth is expected to be fueled by robust domestic demand, improved financing conditions, and reduced tariffs on Indian exports to the US.

In its April 2026 Asian Development Outlook report, ADB cautioned that ongoing conflicts in the Middle East could negatively impact India's economic stability through various channels, such as rising energy costs, disruptions in trade, and decreased remittance flows.

Inflation is projected to rise significantly, from 2.1% in 2025-26 to 4.5% in the current fiscal year, primarily due to a rebound in food prices, increased global oil prices, currency depreciation, and higher costs of precious metals. However, inflation is expected to moderate to 4% by the 2027-28 fiscal year as oil prices stabilize and food costs decrease.

ADB Chief Economist Albert Park highlighted that the ongoing conflict in the Middle East poses the greatest risk to the economic outlook for the Asia-Pacific region, potentially leading to sustained high prices for energy and food, along with tighter financial conditions. He emphasized the need for governments to adopt sound macroeconomic policies to maintain growth and manage inflation, particularly through targeted support for vulnerable populations.

The ADB also predicts that economic growth in the Asia-Pacific region will slow to 5.1% in both 2026 and 2027, down from 5.4% last year, largely due to the Middle Eastern conflict and ongoing trade uncertainties.

The recent spike in energy prices and potential disruptions in fertilizer markets linked to the Middle East situation could exert inflationary pressure on global food prices.

For India, the ADB anticipates GDP growth will decrease to 6.9% in the current fiscal year (April-March), down from 7.6% in 2025-26, primarily due to external challenges. However, growth is expected to rebound to 7.3% in FY2027 as consumption and investment benefit from favorable policies and an improved external environment.

A significant challenge for India is to streamline subsidies and transfers to safeguard vulnerable groups while maintaining fiscal space for growth-enhancing public investments.

Despite a deteriorating global economic and geopolitical landscape, India's growth is projected to remain strong at 6.9% for the fiscal year 2026 (2026-27), supported by strong domestic demand, easing financing conditions, and lower US tariffs on Indian goods.

The ADB's growth estimates align with those of the Reserve Bank of India (RBI) at 6.9%, while the World Bank estimates it at 6.6%, the OECD at 6.1%, and Moody's Ratings at 6%.

Growth is expected to rise to 7.3% in FY 2027-28, driven by domestic reforms, the impact of trade agreements with the European Union, and anticipated salary increases for government employees.

In a previous report released in December 2025, ADB had projected India's GDP growth at 6.5% for the fiscal year 2026-27.

While rising inflation, particularly in food and fuel, may dampen private consumption in the current fiscal year, GDP growth is expected to improve in the next fiscal year as domestic demand strengthens due to salary and pension hikes for government employees and increased investment from key regulatory reforms.

External demand is likely to improve as the trade agreement with the European Union enhances exports.

However, higher global oil prices resulting from the Middle East crisis could exert upward pressure on inflation, significantly widen the current account deficit, and hinder growth by increasing input costs. The actual impact will depend on how much of these costs are passed on to domestic fuel prices.

ADB noted that while limited pass-through could mitigate the immediate effects on inflation and growth, it would increase fiscal pressure due to higher subsidy requirements.

The Manila-based multilateral development bank indicated that with strong growth and inflation likely to average around the midpoint of the target band, the central bank is expected to maintain key policy rates at their current levels for most of FY2026.

Fiscal consolidation in FY2026 will rely more on expenditure discipline than on revenue growth, according to ADB.