ADB raises India’s FY26 growth forecast to 7.2%

ADB revised India’s inflation forecast for FY26 down to 2.6 percent, from 3.1 percent previously

The Asian Development Bank (ADB) has raised India’s FY26 growth forecast to 7.2 percent, up from 6.5 percent earlier, citing a consumption boost following recent tax cuts. The upgrade comes days after India reported a six-quarter high GDP growth of 8.2 percent in Q2FY26.

“Growth in India exceeded expectations as gross domestic product (GDP) expanded by 8.2% in the second quarter of the current fiscal year (July to September 2025), the fastest in six quarters, driven by strong private consumption and despite muted government consumption,” the Manila-headquartered bank said on December 10.

For FY27, however, ADB kept its projection unchanged at 6.5 percent.

ADB also noted the resilience of India’s exports, “notably rising to the US up to July, driven by tariff-exempt sectors such as smartphones and pharmaceuticals and frontloading in other sectors.”

The revision follows similar optimism from global institutions. The International Monetary Fund recently commended India’s growth performance and its adherence to fiscal targets. The move also comes after the Reserve Bank of India raised its FY26 growth forecast to 7.3 percent, up from 6.6 percent earlier.

ADB revised India’s inflation forecast for FY26 down to 2.6 percent, from 3.1 percent previously. Inflation may be even lower, as the RBI now expects prices to rise just 2.1 percent this fiscal. In October, retail inflation fell to 0.3 percent, the lowest reading in the current series which started in 2012.

“This decline was due to GST reductions and food price deflation for a second successive month, supported by favorable agricultural output and benign weather conditions,” ADB said.

For FY27, the multilateral lender expects inflation to rise modestly and settle at 4.2 percent, returning closer to the RBI’s target.