ADB revises upward India’s GDP growth to 7.2% for FY26

New Delhi: The Asian Development Bank (ADB) on Wednesday upped India’s growth forecast for FY26 to 7.2 per cent from 6.5 per cent driven primarily by robust domestic consumption supported by recent tax cuts.

The sharp upgrade of 0.7 percentage points of the Indian economy will help Asia to grow at a faster pace of 5.1 per cent as compared to earlier projection of 4.8 per cent for 2025.

India’s 2025 growth projection is raised to 7.2 per cent, reflecting stronger second-quarter expansion as tax cuts supported consumption, ADB’s Asian Development Outlook, December 2025 said.

During the second quarter ended September, India logged a six-quarter high GDP growth of 8.2 per cent as compared to 7.8 per cent recorded in the first quarter. As a result, India has achieved 8 per cent growth rate in the first half of the current financial year.

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, it said.

The report from Manila-based multilateral development bank, however, retained FY27 forecast at 6.5 per cent.

“Following stronger-than-anticipated growth in Q3, India’s 2025 growth projection is upgraded by 0.7 percentage points to 7.2 per cent, driven primarily by robust domestic consumption supported by recent tax cuts,” it said.

Earlier this month, the Reserve Bank raised the GDP growth projection to 7.3 per cent for the current fiscal from its earlier estimate of 6.8 per cent following robust economic performance in the July-September quarter.

However, RBI expects moderation in the next half as it has pegged real GDP growth at 7.3 per cent, with Q3 at 7 per cent; and Q4 at 6.5 per cent. Growth is expected to moderate in the second half as the central government’s capital spending eases amid fiscal consolidation, and export growth softens due to elevated US tariffs impacting select Indian exports, it said.

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

On the supply side, domestic industrial demand will be tempered by muted goods exports and strong imports. The services sector, which has grown by 9.3 per cent in the first half of FY2026, will continue to grow strongly, it said.