ADB Raises India FY26 Growth Forecast

The Asian Development Bank (ADB) has significantly raised India's GDP growth forecast for FY26 to 7.2% from an earlier 6.5%, primarily attributing this to strong domestic consumption bolstered by recent tax cuts. This upgrade also led to a higher growth projection for Asia-Pacific. India recorded an impressive 8.2% GDP growth in the second quarter of FY26, driven by robust expansion in manufacturing, services, consumption, and investment. The State Bank of India (RBI) also increased its GDP growth estimate for the current financial year to 7.3%. While growth is expected to moderate in the second half due to government capital spending adjustments and United States tariffs on Indian goods, strong consumer demand, a buoyant rural economy, GST rate cuts, and steady credit growth are anticipated to sustain the positive momentum. Risks remain balanced, with potential trade tensions and weather shocks posing downside risks, while successful trade negotiations with the United States could offer an upside. Inflation is also expected to ease in FY26 due to favorable monsoon conditions and GST rate cuts.