The Asian Development Bank (ADB) has shared a fresh dose of optimism for India’s economic trajectory, sharply lifting its growth estimate for FY26 to 7.2
per cent from its earlier projection of 6.5 per cent. The multilateral lender attributes this upgrade primarily to a wave of domestic demand pushed by the recent tax reductions, giving the economy stronger momentum than previously expected. The revision also lends a lift to the broader region, with Asia’s 2025 outlook rising to 5.1 per cent from 4.8 per cent. According to the ADB’s latest Asian Development Outlook (December 2025), “India's 2025 growth projection is raised to 7.2 per cent, reflecting stronger second-quarter expansion as tax cuts supported consumption.” The economy clocked an 8.2 per cent expansion in the July–September quarter, the fastest in six quarters and up from 7.8 per cent in the previous quarter. With both quarters combined, India has already achieved an impressive 8 per cent growth rate in the first half of the current fiscal year. The Bank noted that the country’s performance is being pushed by vigorous expansion across manufacturing and services on the supply side, and a healthy mix of consumption and investment on the demand side. However, its FY27 growth forecast remains unchanged at 6.5 per cent. RBI Sees Near-Term Cooling Earlier in the month, the Reserve Bank of India also nudged up its projection for the full year to 7.3 per cent from 6.8 per cent, reflecting the surprisingly strong second-quarter showing. Yet it anticipates a mild slowdown in the latter half of the year as government capex moderates and higher US tariffs weigh on specific export categories. It expects real GDP growth of 7 per cent in Q3 and 6.5 per cent in Q4. Risks Evenly Balanced As Inflation Softens ADB further highlighted that “Following stronger-than-anticipated growth in Q3, India's 2025 growth projection is upgraded by 0.7 percentage points to 7.2 per cent, driven primarily by robust domestic consumption supported by recent tax cuts.” The report also highlights that risks remain broadly balanced, noting: “Risks remain balanced, with downside risks coming from potential escalation of trade tensions and weather-related shocks, while upside potential could emerge if trade negotiations with the US yield a lower tariff rate for India.” Inflation projections have been trimmed as well, with the FY26 estimate cut to 2.6 per cent from 3.1 per cent, supported by favourable monsoon patterns, strong agricultural output, and the impact of GST rate adjustments. Although headline inflation has recently eased because of falling prices in vegetables and pulses, the ADB cautions that the trend could reverse early in FY27 as base effects fade.
