ADB lowers FY27 growth forecast, raises inflation outlook
The Asian Development Bank (ADB), in its July Asian Development Outlook (ADO), has lowered India’s economic growth forecast for the fiscal year ending March 2027 (FY27) to 6.6 per cent from 6.9 per cent projected in April. It noted that elevated oil and transportation costs are weighing on consumer sentiment and private demand, while higher energy prices have squeezed real incomes. However, it stated that growth will continue to be supported by policy measures aimed at attracting foreign capital, fuel tax cuts, targeted credit support, robust services exports, and sustained public capital expenditure.
The ADB retained its FY28 growth forecast at 7.3 per cent, citing improved global conditions and enhanced export competitiveness stemming from trade agreements with various partners. However, it cautioned that risks remain tilted to the downside due to heightened geopolitical tensions and the possibility of weather-related disruptions to agricultural output.
On the inflation front, it revised India's FY27 inflation forecast upward to 5.2 per cent from 4.5 per cent projected in April, driven by higher oil prices and a weaker rupee. Food inflation is also expected to remain elevated due to heatwaves and the fading impact of favourable base effects. However, it maintained the FY28 inflation forecast at 4.0 per cent, anticipating a moderation in fuel and food prices, supported by favourable base effects. It further noted that India, the world's largest rice exporter, is likely to see rice production decline by about 5 per cent from the record harvest achieved in 2025.
