FY26 estimate has been revised downward from 6.7% to 6.5%

The Asian Development Bank (ADB) has forecast India’s GDP to grow by 6.5% in both fiscal years FY2025 and FY2026, according to the Asian Development Outlook released on Tuesday. While the FY2025 forecast remains unchanged from ADB’s July 2025 projection, the FY2026 estimate has been revised downward from 6.7% to 6.5%. This adjustment reflects anticipated headwinds from newly imposed US tariffs on Indian exports. However, resilient domestic consumption and strong performance in service exports are expected to cushion the impact of these trade barriers.

Inflation is projected to ease to 3.1% in FY2025 but may rise towards the inflation target in the following year. With monetary policy authorities undertaking significant rate cuts already, there may be slower rate cuts going forward. 

The report highlights several near-term risks, including escalating trade tensions that could impact broader sectors of the economy, global geopolitical uncertainties that may dampen demand for India’s exports, and domestic disruptions stemming from ongoing flood-related shocks. However, on the upside, growth could be spurred if US tariffs on India are lowered to be more in line with those imposed on other countries in Asia and the Pacific.

“Despite ongoing trade challenges, we remain optimistic about India’s long-term growth trajectory,” said ADB Country Director for India Mio Oka. “The implementation of tariffs will weigh on growth, but the overall impact on GDP is expected to be contained due to India’s relatively lower exposure to the US market, increased exports to alternative markets, sustained strength in services exports, and a pickup in domestic demand.” 

‘India set for 6.5% average growth over next decade’

India is set for a 6.5% annual growth rate for the next decade and can clock higher growth if the industrial and export sectors expand at a much faster pace, Morgan Stanley said in a report on Tuesday. The investment banking firm said that India has huge room for growth in the export sector, which can be boosted through a comprehensive reform package. Morgan Stanley also concurred with this view, saying, "In our base case, India's GDP will grow at this rate over the coming decade, one of the fastest-growing economies globally."