In the July edition of its Asian Development Outlook, the multilateral lender retained its FY28 growth forecast at 7.3%, saying the outlook is underpinned by improved global conditions and export competitiveness gained through trade agreements with various partners.
Also read: IMF lowers India’s FY27 growth outlook, retains status as fastest-growing economy
ADB said the downgrade reflects the impact of elevated energy prices on household purchasing power. Despite the weaker outlook, it expects growth to be supported by policy interventions to attract more foreign capital, fuel tax cuts, targeted credit support, strong services exports and continued public capital expenditure.
The lender said risks to the growth outlook remain tilted to the downside, citing heightened geopolitical tensions and weather-induced weakness in agriculture.
Reflecting the weaker outlook for India, ADB also lowered South Asia’s growth projection for 2026 by 0.3 percentage points, saying the revision was largely driven by India, where elevated oil and transportation costs are weighing on consumer sentiment and private demand.
Also read: India’s economy suffers from ‘standstill’ in ambition despite 6% growth
FY27 inflation forecast raised to 5.2%
ADB revised India’s FY27 inflation forecast upward to 5.2% from 4.5% projected in April, driven by higher oil prices and a weaker rupee.
It said food inflation is expected to face additional pressure from heatwaves and the fading of favourable base effects, adding to broader price pressures.The lender retained its FY28 inflation forecast at 4%, expecting fuel and food prices to normalise, supported by favourable base effects.
The latest revisions come as ADB expects higher energy prices to continue weighing on the region. For South Asia, it said elevated oil and transportation costs are dampening consumer sentiment and private demand, while India’s medium-term growth outlook continues to be supported by policy measures, public investment, services exports and improving global conditions.