The improved forecast for India follows a stronger-than-expected 8.2% expansion in the September quarter.

NEW DELHI: The Asian Development Bank (ADB) on Wednesday raised its FY26 growth forecast for India to 7.2%, up from the 6.5% projected in September. The upgrade also helped lift the bank's outlook for developing Asia and the Pacific in 2025 by 0.3 percentage points to 5.1%. Developing Asia includes the 46 developing members of the ADB.

ADB attributed the revision for India to robust domestic consumption, while solid export performance in the region's high-income, technology-exporting economies contributed to the improved regional outlook.

ADB kept its FY27 growth projection for India unchanged at 6.5%, and nudged up its estimate for the region by 0.1 percentage points to 4.6%. ADB's India forecasts follow the financial year ending March.

"Asia and the Pacific's solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty over the past year," according to a statement quoting chief economist Albert Park.

Trade agreements have eased some of that uncertainty, Park said, but external risks remain, and governments should continue to support open trade and investment.

Resilient exports, particularly of semiconductors and other technology products, moderating inflation, and stable financial conditions have strengthened the region's growth outlook, the multilateral agency said.

The improved forecast for India follows a stronger-than-expected 8.2% expansion in the September quarter. The upside surprise has prompted both chief economic adviser V. Anantha Nageswaran and finance minister Nirmala Sitharaman to signal that full-year growth could exceed 7%, with the first half already clocking 8%.

"The strong growth is attributable to robust expansion of the manufacturing and services sectors on the supply side and consumption and investment on the demand side. Exports remained resilient due to frontloading ahead of elevated US tariffs and diversification to non-US markets," said the Bank's Asian Development Outlook December 2025.

Growth is, however, expected to moderate in the second half, as the central government's capital spending eases amid fiscal consolidation efforts, and export growth softens, driven by elevated US tariffs impacting select Indian exports, ADB said.

"However, stronger than-expected consumption demand, helped by a robust rural economy, the impact of GST rate cuts, and steady credit growth will support growth," ADB said.

Domestic industrial demand will be tempered by muted goods exports and strong imports, it said.

The services sector, growing 9.3% in the first half of the fiscal year, will remain a key driver, supported by firm domestic and external demand, the outlook said.

FY27 outlook

For FY27, ADB expects growth of 6.5%, with an unfavourable base effect from this year's strong first half partly offset by recent policy steps aimed at boosting activity, including greater labour market flexibility, GST simplification, relaxation of some import restrictions, and credit relief for exporters affected by US tariffs.

Risks remain balanced, with downside risks including the potential escalation of trade tensions and weather‑related shocks, while tailwinds could emerge if trade negotiations with the US yield a lower tariff rate for India, ADB stated.

The Centre is currently preparing for the Union Budget for the next financial year, which will be presented on 1 February. Besides reform measures across the board, the budget is also expected to lower customs tariffs on select goods and simplify procedures to improve cross-border trade.