ADB lowers India's FY26 growth forecast

New Delhi: The Asian Development Bank (ADB) on Wednesday lowered India's growth forecast for FY26 to 6.5 percent from 6.7 percent on account of trade uncertainty and higher US tariffs that are expected to impact exports and investment. Despite the downward revision from the April 2025 Asian Develop ment Outlook (ADO), India remains one of the fastest-growing major economies in the world.

"This revision is primarily due to the impact of US baseline tariffs and associated policy uncertainty. In addition to the effects of lower global growth and the direct impact of additional US tariffs on Indian exports, heightened policy uncertainty may affect investment flows," the July ADO said. Despite this, economic activity remains robust, with domestic consumption set to grow strongly on the back of revival of rural de mand, it said.

Services and agriculture sectors are expected to be key drivers of growth, the latter supported by a forecast of above-normal mon soon rains, it added. The Economic Survey has projected the GDP growth for FY26 between 6.3 per cent and 6.8 per cent, while RBI lowered its growth forecast from an earlier level of 6.7 per cent to 6.5 percent for the ongoing financial year.

India's economy grew by 6.5 percent in the FY25, marking its slowest pace in four years. This growth was the slowest in four years and compared to a 9.2 percent expansion in the previous 2023-24 f iscal.

According to the report, the central government's fiscal position remains strong, with higher-than-expected dividends from the Reserve Bank of India, and it is on track to meet the targeted reduction in its fiscal deficit. In FY27, growth is projected to improve to 6.7 percent on account of rising invest ments, under the assumption of reduced policy uncertainty and favourable financial conditions, backed by recent reductions in the reporate and the cash re serve ratio by the monetary au thorities, the report said. (PTI)