ADB, IndRa lower India’s growth projections

In its Asia Development Outlook July 2025 update, the ADB lowered India’s GDP growth projection for the current financial year to 6.5% from its earlier estimate of 6.7% announced in April.

New Delhi: The Asian Development Bank (ADB) and India Ratings and Research on Wednesday lowered their respective projections on India’s economic growth for the current financial year citing negative impact of the US tariff policies and weak demands and investment climate.

In its Asia Development Outlook July 2025 update, the ADB lowered India’s GDP growth projection for the current financial year to 6.5 per cent from its earlier estimate of 6.7 per cent announced in April.

Manila-headquartered ADB has also revised downward 2026-27 growth projection 10 basis points to 6.7 per cent. India’s gross domestic product (GDP) expanded by 6.5 per cent in the financial year ended March 2025, as per the latest government data.

The downgrades are driven by expectations of reduced exports amid higher United States tariffs and global trade uncertainty, as well as weaker domestic demand.

“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,” ADB said.

Despite the slowdown, India would remain one of the fastest growing major economies in the world, the ADB said.

In its mid-year economic outlook, India Ratings and Research (Ind-Ra) lowered the country’s GDP growth projection for 2025-26 to 6.3 per cent from its earlier estimate of 6.6 per cent announced in December 2024.

Both domestic and global landscapes have changed significantly since our last forecast. The economy is facing both headwinds and tailwinds, said Devendra Kumar Pant, chief economist and head public finance at Ind-Ra.

According to Pant, major headwinds include uncertain global scenarios from the unilateral tariff hikes by the US for all countries and weaker-than-expected investment climate.

The major tailwinds are: monetary easing, faster-than-expected inflation decline, and likely above-normal rainfall in 2025, he added.

Ind-Ra expects the Consumer Price Index (CPI) based retail inflation to average 3 per cent in FY26 as against its earlier forecast of 4.3 per cent. In the financial year ended March 2025 retail inflation averaged at 4.6 per cent.

The annual retail inflation fell to a 77-month low of 2.1 per cent in June 2025, staying below the 4 per cent mark (RBI’s inflation target) for the fifth consecutive month. The drop was due to a sharp fall in food inflation to negative 1.1 per cent in June 2025 from 10.9 per cent in October 2024.

The ADB has revised downward its projection on India’s retail inflation for the current financial year to 3.8 per cent from its April projection of 4.3 per cent, citing faster-than-expected decline in food prices due to better agricultural production. For the 2026-27 financial year the ADB has kept its projection on India’s retail inflation unchanged at 4 per cent.

The ADB has downgraded its forecast on most of the economies in developing Asia and Pacific. The growth forecast for developing Asia and the Pacific region has been lowered by 20 basis points to 4.7 per cent for 2025.

Higher US tariffs and trade uncertainty are the main risks for the region’s outlook. Renewed geopolitical tensions and a faster deterioration in China’s property market could also weaken regional growth, the ADB said.