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The Asian Development Bank (ADB) in its latest report titled ‘the Asian Development Outlook (ADO) April 2025’ has said that India’s gross domestic product (GDP) is expected to expand by 6.7% in fiscal year (FY) 2025, on account of higher domestic demand, rising rural incomes, a strong services sector, and moderating inflation that will boost consumer confidence.

 ADB further noted that favorable monetary and fiscal policies are expected to sustain the growth momentum, with GDP projected to increase by 6.8% in FY2026. It said these growth forecasts were finalized prior to the April 2 announcement of new tariffs by the US administration, so the baseline projections only reflect tariffs that were in place previously.

According to the report, consumption will be a major growth driver, fueled by rising rural incomes and increased demand from urban middle-class and affluent households thanks to reductions in personal income tax rates. Additionally, moderating inflation is expected to further boost consumer sentiment with rates projected at 4.3% in FY2025 before declining slightly to 4.0% in FY2026. Falling inflation would create policy space for more cuts to repo rate even with global financial uncertainty.

ADB further said that the services sector will remain a key growth driver, supported by the expansion of business services exports, education, and health services. The agriculture sector is expected to maintain strong growth in FY2025, driven by robust winter crop sowing, particularly wheat and pulses. Meanwhile, the manufacturing sector is anticipated to rebound after experiencing tepid growth in FY2024.