Asian Development Bank Cuts India’s FY25 And FY26 GDP Forecast To 6.5 Per, Citing US Tariffs

The Asian Development Bank (ADB) has lowered India’s FY26 GDP growth forecast to 6.5 per cent from an earlier estimate of 6.7 per cent, citing the impact of additional US tariffs on exports.

While GDP rose substantially in the first quarter of FY26, driven by consumption and government spending, new US tariffs on exports may slow growth, notably in the second half of FY26 and FY27, according to the ADB's most recent Asian Development Outlook report.

ADB noted that net exports will subtract more from growth than previously expected, although strong domestic demand, robust service exports, and rising exports to other countries will partially offset the impact.

Strong domestic demand and services exports will also help soften the impact, the report added.

The bank expects India’s fiscal deficit to exceed the budgeted 4.4 per cent of GDP, as slower tax revenue growth follows GST cuts not included in the budget.

Despite a 1.5 per cent fall in tax revenue, government income rose 4.8 per cent due to higher capital and current expenditure. Spending is assumed to remain at planned levels, which will push up the deficit, the report said.

ADB projects India’s current account deficit to widen from 0.6 per cent of GDP in FY25 to 0.9 per cent in FY26 and 1.1 per cent in FY27, while inflation is lowered to 5.1 per cent for FY26 but expected to rise in FY27.

The bank also noted subdued foreign investment flows amid global trade uncertainty.

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