Asian Development Bank Lifts India's FY27 Growth Projection to 7% on Strong Q1 Performance

Key facts

• The Asian Development Bank (ADB) raised India's GDP growth forecast for FY2026-27 (FY27) to 7 per cent, up from 6.6 per cent projected in July, citing stronger-than-expected Q1 performance with GDP expanding 7.8 per cent year-on-year.
• ADB now projects India's FY28 growth at 7.1 per cent, lower than its earlier forecast of 7.3 per cent, largely reflecting a stronger GDP base.
• ADB lowered India's FY27 inflation forecast from 5.2 per cent to 5 per cent, while FY28 inflation is expected at 4 per cent.
• India's central government capital expenditure rose 29.9 per cent in the first quarter of the current financial year, on track to meet its 11.5 per cent annual target.
• India's fiscal deficit is expected to stay around 4.3 per cent of GDP despite higher fertiliser subsidy spending and fuel tax cuts.
• India's foreign exchange reserves rose to USD 740.8 billion, helped by the RBI's measures to attract foreign capital.
• The current account deficit is projected to expand in FY27 due to higher commodity prices before narrowing in FY28 on lower oil prices and strong export growth.
• Key risks to growth include prolonged geopolitical uncertainty and weather disruptions linked to El Nino, which may lower agricultural output and raise industrial input costs.