The Asian Development Bank (ADB) on Thursday reduced India’s GDP growth forecast from 6.9 to 6.6 per cent for the current fiscal year due to worries about rising energy due to West Asia crisis. India's economy is still the fastest-growing major economy in the world despite the slowdown in growth.
According to the Asian Development Outlook (ADO) July 2026, India’s GDP growth projections have been lowered to 6.6 per cent for FY2026 (ending March 31, 2027) and kept at 7.3 per cent for FY2027. “The FY2026 (2026-27) forecast is lowered from 6.9 per cent projected in April, reflecting elevated energy prices, which squeeze real incomes, as per the ADB report.
“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,” it stated.
The report stated that the growth outlook for FY2027 is unchanged from April and is supported by improving global conditions and export competitiveness achieved through trade agreements with different partners.
However, it noted that there could be a downward trend due to increased geopolitical tensions or agricultural challenges spurred by bad weather. In terms of inflation, the report significantly increased its projection from 4.5 per cent in April to 5.2 per cent.
“Upward revisions reflect higher global energy prices from the Middle East conflict feeding through to fuel, transport, and food costs across the subregion. 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 fading of favourable base effects,” it said.
The FY28 estimate is maintained at 4 per cent due to favourable base effects and the normalisation of fuel and food costs, the report stated.
The RBI also reduced its GDP growth estimate for FY27 from 6.9 per cent to 6.6 per cent last month, while increasing its inflation projection from 4.6 per cent to 5.1 per cent. Also, the report has reduced its growth estimate for developing economies in Asia and the Pacific to 4.9 per cent in 2026 from 5.5 per cent in 2025.
“This is a reduction of 0.2 percentage points from April projections. Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region's prospects than anticipated,” as per the report.
Furthermore, the report anticipates that disruptions to the world's energy markets will only gradually end despite a framework deal agreed in June. However, inflationary pressures are expected to continue, with effects that go beyond energy to fertilizers, other commodity prices, and supply chains.
Also read: ADB cuts Asia-Pacific growth forecast to 4.9 pc for 2026
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