The Asian Development Bank (ADB) on Friday raised India’s GDP growth estimate for 2026-27 by 40 basis points to 6.9%, citing stronger consumption and investment momentum. It also projected growth to pick up further to 7.3% in FY28.
The revision comes close on the heels of the World Bank’s update earlier this week. On Wednesday, the World Bank raised India’s growth estimate for FY27 by 30 basis points to 6.6%, partly supported by free trade agreements (FTAs), even as risks from the ongoing West Asia crisis persist.
“Rising consumption and investment will drive growth in 2026-27, supported by favourable policies and structural reforms, while a more benign external environment compared to 2025-26 will bolster exports,” ADB said in its Asian Development Outlook April 2026.
In its previous December update, the multilateral lender had projected India’s GDP to grow at 6.5% in FY27 and inflation at 4.2%. It has now revised its inflation forecast upward to 4.5% for FY27.
“On the supply side, manufacturing and services growth are expected to remain strong, aided by domestic reforms and favorable access to foreign markets under newly signed trade deals,” ADB said.
Looking ahead, growth is expected to strengthen further in 2027-28 as domestic demand gains traction. This will be supported by higher salaries and pensions for government employees, along with a pickup in investment driven by key regulatory reforms. External demand is also likely to improve, with exports benefiting from trade agreements, particularly with the European Union.
ADB expects the monetary policy stance to remain unchanged in the near term, while fiscal consolidation efforts continue. On the external front, the current account deficit is projected to widen in FY2026 before narrowing in FY2027. The merchandise trade deficit, as a share of GDP, is likely to expand in FY27 due to a higher import bill, driven by elevated crude and gas prices as well as a weaker currency.
On the supply side, the manufacturing sector is expected to benefit significantly from recent trade agreements with the European Union, the United States, and New Zealand, strengthening India’s integration with global markets, it said.
Consumption is set to remain the primary driver of growth, supported by rising real incomes in both rural and urban areas. However, consumption growth is expected to normalize in 2026-27 as the boost from tax cuts introduced in the previous fiscal year gradually fades. At the same time, rising inflation—particularly in food and petroleum products—could weigh on household spending.
That said, monetary easing is expected to provide some support. A cumulative 125 basis point reduction in the RBI’s policy rate is likely to boost demand for consumer durables. Rural consumption, meanwhile, will continue to be supported by government spending on welfare programmes, price support for key agricultural commodities, and resilient rural incomes.
Consumer sentiment also remains upbeat. The RBI’s rural and urban consumer confidence surveys indicate sustained optimism, driven by positive expectations around economic conditions, income, and spending. Additionally, a once-in-a-decade revision in salaries and pensions of central government employees is expected to further support consumption in FY28, ADB said.
Investment will continue to play a crucial role in supporting growth in FY27. The Centre’s capital expenditure is budgeted to grow by 11.5%, a sharp increase from 4.2% in FY26. Private investment prospects also remain strong, supported by accommodative monetary policy, ongoing regulatory reforms—including greater labour flexibility—and efforts to deepen integration with global value chains.
On the external side, despite uncertainty around US tariffs, the effective tariff rate for India in FY27 is expected to be lower than in FY26, supporting moderate export growth. A relatively weaker rupee compared to peer economies is also likely to aid export competitiveness. However, higher oil prices could push up import costs, while remittance growth—especially from the Middle East—may moderate over the forecast period, ADB added.
TOPICSAsian Development BankThis article was first uploaded on April eleven, twenty twenty-six, at twenty-four minutes past one in the night.