HOME > MARKETS > ECONOMY NEWS
  ECONOMY NEWS
ECONOMY
ADB revises upward India's economic growth forecast for FY27 to 7%
Sep-23-2026

The Asian Development Bank (ADB), in its Asian Development Outlook (ADO) September 2026, has raised India's economic growth forecast for the current fiscal year 2026-27 (FY27) by 0.4 percentage points to 7 per cent, up from 6.6 per cent projected in July, citing stronger-than-expected economic performance in the first quarter supported by robust investment demand, resilient consumption, and solid growth in manufacturing and service sectors, despite supply-side disruptions caused by West Asia crisis.  The economy has also benefited from lower-than-expected supply disruptions, sustained capital inflows, and limited pass-through of higher input cost to consumer prices, which helped cushion the impact of the conflict in the Middle East.

ADB has projected FY28 growth at 7.1 per cent, slightly lower than its earlier forecast of 7.3 per cent, largely reflecting a stronger GDP base. It said beyond the temporary impact of higher fuel prices and inflation, domestic demand is expected to remain the main engine of growth in both FY27 and FY28, supported by robust tax collections, low interest rates, rising household incomes, and the anticipated revision of government salaries and pensions in the next financial year.

With regard to inflation, the report said though it has steadily risen recently, the forecast for FY27 has been lowered from 5.2 per cent to 5 per cent, as the rise has been more gradual and previously anticipated. Inflation is expected to decline to 4 per cent in FY28, same as forecast in July, as energy prices are anticipated to moderate and agricultural supply recover under a normal monsoon assumption. It further said while inflation is expected to remain within the Reserve Bank of India's (RBI’s) target range, the central bank may consider raising the repo rate if inflationary pressures intensify.

It added that strong public spending remains a key growth driver, with central government capital expenditure rising 29.9 per cent in the first quarter of the current financial year and on track to meet its 11.5 per cent annual target. The report emphasised that the private investment is expected to pick up, supported by government measures to enhance the investment climate, including improvements in logistics infrastructure, regulatory reforms, and a strong pipeline of projects. It said despite higher fertiliser subsidy spending and fuel tax cuts, the fiscal deficit is expected to stay around 4.3 per cent of GDP, supported by robust direct tax revenues and additional receipts from oil export taxes and precious metals duties.

It said the current account deficit is projected to expand in FY27 due to higher commodity prices before narrowing in FY28, aided by lower oil prices and strong export growth. Foreign exchange reserves rose to $740.8 billion, helped by RBI's measures to attract foreign capital. The report noted key risks to future growth on account of prolonged geopolitical uncertainty, and weather disruptions linked to El Nino, a climate phenomenon that can increase temperatures and decrease rainfall. These risks may lower agricultural output and raise industrial input costs. However, it said services and construction are likely to remain robust in the current financial year and the next year.
  RELATED NEWS >>
Most Viewed >>
EXPLORE
© CITRUS INTERACTIVE
Designed & Developed Accord Fintech Pvt. Ltd.