India’s gross domestic product (GDP) is projected to grow by 6.7 per cent this fiscal year, driven by robust domestic demand, increasing rural incomes, and easing inflation, according to the Asian Development Bank (ADB) on Wednesday. Supportive fiscal and monetary policies should maintain this upward trend, with GDP expected to rise to 6.8 per cent in FY26 (2026-27), as per the Asian Development Outlook (ADO) in April 2025.
In contrast, the Reserve Bank of India (RBI) revised its GDP forecast downward to 6.5 per cent from 6.7 per cent for the current year, citing global trade disruptions and policy uncertainties.
Despite worldwide challenges, India’s growth remains sturdy, fueled by government efforts in infrastructure and employment generation, noted ADB Country Director for India, Mio Oka.
“Enhancements in manufacturing through regulatory changes, alongside strong agriculture and services sectors, plus new tax benefits for the middle class, will keep India’s economic momentum alive,” she stated.
The ADB predicts a 6.7 per cent GDP increase in 2025-26 (ending March 31, 2026), propelled by rising domestic demand, higher rural earnings, a thriving services industry, and cooling inflation that lifts consumer optimism.
The report highlights that consumption will lead to growth, supported by rural income gains and heightened demand from urban middle and upper-income groups, aided by personal income tax cuts.
It also forecasts inflation dropping to 4.3 per cent in FY26, then to 4 per cent in FY27, further enhancing consumer morale.
The report suggests that this decline in inflation could allow more repo rate reductions despite global financial volatility.
On Wednesday, the RBI lowered the policy rate by 25 basis points for the second straight time, reducing the repo rate to 6 per cent, totalling a 50 basis-point cut over two recent MPC meetings.
The report adds that the services sector will continue powering growth, bolstered by expanding exports in business services, education, and healthcare.
Agriculture is set to thrive in FY25 with strong winter crop planting, like wheat and pulses, while manufacturing is poised to recover from its sluggish 2024-25 performance.
Urban infrastructure investment will grow, backed by a new government fund starting at Rs 100 billion (USD 1.17 billion).
Though global economic instability may dampen private investment in the short term, the report notes that lower borrowing costs and upcoming reforms should spur it eventually.
It warns of near-term risks, such as US tariff hikes on Indian exports and global shifts raising commodity costs.
Yet, it argues that India’s solid macroeconomic stance should cushion some of these threats.
The report clarifies that its forecasts predate the US tariff announcement on April 2, reflecting only prior tariffs.
Still, the ADO April 2025 includes assessing how elevated tariffs might influence growth across Asia and the Pacific.