ADB Uplifts India’s Growth Outlook Amid Resilient Demand and Reduced US Tariff Pressures

This latest projection marks a notable upgrade from the ADB’s December 2025 report, which had previously pegged India's GDP growth at 6.5% for the 2026-27 fiscal period. The report emphasized that despite a deteriorating global economic and geopolitical climate, Indian growth will remain robust at 6.9% in fiscal year 2026. This activity is expected to be underpinned by formidable domestic demand, further supported by easing financing conditions and a lower effective US tariff rate on Indian goods compared to the previous year.

While the reduction in US tariffs is anticipated to bolster export growth, the ADB noted that net exports will likely remain a drag on total output in the near term due to an influx of imports, particularly within the energy sector. Furthermore, the institution issued a stern warning that a prolonged conflict in the Middle East poses a significant threat to India's macroeconomic stability through various transmission channels.

Inflationary pressures are also on the horizon, with projections rising to 4.5% in FY2026, driven by elevated food and energy costs amid ongoing geopolitical tensions. However, these pressures are expected to moderate to 4.0% in FY2027. The ADB highlighted that while limited pass-through of costs could temporarily cushion the impact on growth, it would simultaneously escalate fiscal pressure by necessitating higher subsidy requirements.

On a broader scale, growth across developing Asia and the Pacific is set to decelerate to 5.1% in 2026 and 2027, down from 5.4% last year, weighed heavily by trade uncertainty and Middle Eastern hostilities. "A prolonged conflict in the Middle East is the single biggest risk to the region’s outlook," stated ADB Chief Economist Albert Park, cautioning that such instability could trigger a surge in energy and food prices while tightening global financial conditions.