The Asian Development Bank (ADB) has raised India’s GDP growth forecast for FY27 to 6.9%, up from its earlier estimate of 6.5%, citing strong domestic demand, easing financing conditions, and lower US tariffs on Indian goods.
For FY28, ADB expects India’s economy to grow even faster at 7.3%, driven by domestic reforms, trade gains, and stronger consumer spending.
Growth Outlook Remains Strong
According to ADB’s latest Asian Development Outlook report:
- FY27 GDP growth forecast: 6.9%
- FY28 GDP growth forecast: 7.3%
- Previous FY26 actual growth: 7.6%
ADB noted that India’s economic resilience continues despite a worsening global geopolitical environment.
Key Drivers Behind Higher Growth
India’s improved outlook is being supported by:
- Strong household consumption demand
- Easier financing conditions
- Lower US tariffs on Indian exports
- Expected government salary and pension hikes
- Gains from upcoming EU trade agreements
ADB expects domestic reforms and regulatory improvements to further stimulate private investment in FY28.
Inflation Expected to Rise
ADB also warned that inflation could rise sharply:
- Inflation projected at 4.5% in FY27, up from 2.1% in FY26
- Expected to ease to 4.0% in FY28
Main inflation triggers include:
- Rising food prices
- Higher crude oil costs
- Currency weakness
- Increase in precious metal prices
West Asia Conflict a Major Risk
ADB flagged prolonged tensions in West Asia as a serious macroeconomic risk for India. Potential impacts include:
- Higher energy import bills
- Trade route disruptions
- Lower remittance inflows from Gulf countries
Because India relies heavily on oil imports and remittances from the region, prolonged instability could widen the current account deficit and weaken growth momentum.
Oil Prices Could Pressure Fiscal Balance
ADB warned that if oil prices remain elevated:
- Inflationary pressures may intensify
- Government fuel subsidies may rise
- Fiscal burden could increase significantly
The extent of impact will depend on how much higher oil costs are passed on to domestic consumers.
Outlook Ahead
Despite external risks, India remains one of the fastest-growing major economies globally, with domestic consumption and reform momentum continuing to support long-term expansion.
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