ADB upgrades India’s growth projection to 7.2% for fiscal year ending March 2026

The Asian Development Bank (ADB) in its latest Asian Development Outlook has upgraded India’s growth projection by 0.7 percentage points to 7.2% for the fiscal year ending March 2026 from 6.5% projected in the September release. It noted that growth will be driven primarily by robust domestic consumption supported by recent tax cuts.

It noted that GDP grew faster-than-expected 8.2% in the second quarter of the current fiscal (July to September 2025), leading to an average growth of 8% in the first half of the fiscal year. The strong growth is attributable to the robust expansion of the manufacturing and services sectors on the supply side and consumption and investment on the demand side. Exports remained resilient due to frontloading ahead of elevated US tariffs and diversification to non-US markets.

It further said growth is expected to moderate in the second half, as the central government’s capital spending eases amid fiscal consolidation efforts, and export growth softens, driven by elevated US tariffs impacting select Indian exports. However, stronger-than-expected consumption demand, helped by a robust rural economy, the impact of GST rate cuts, and steady credit growth, will support growth. On the supply side, domestic industrial demand will be tempered by muted goods exports and strong imports. The services sector, which has grown by 9.3% the first half of the fiscal year, will continue to grow strongly, helped by robust domestic and external demand.

Growth in the next fiscal year ending March 2027 is maintained at 6.5%. A strong growth outcome in the first half of the current year will result in an unfavourable base effect for the corresponding period in the next year. However, this is likely to be offset by an array of recent measures incentivising growth, such as enhanced labour market flexibility through a revamp of the labour laws, simplification of GST, relaxation of import restrictions for selected products, and credit relief and support to exporters affected by US tariffs.

Risks remain balanced, with downside risks coming from potential escalation of trade tensions and weather‑related shocks, while upside potential could emerge if trade negotiations with the US yield a lower tariff rate for India. Meanwhile, developing Asia’s growth outlook is revised to 5.1% for 2025 and 4.6% for 2026, up by 0.3 and 0.1 percentage points, respectively, from September.