Overview

• India’s GDP is projected at 6.5% in both FY26 and FY27 after a strong 7.8% Q1, with ADB expecting momentum to moderate in the second half as tariffs bite.
• ADB says additional U.S. tariffs will reduce goods exports and make net exports a bigger drag, though the impact is limited by India’s low export share, market rerouting, robust services and policy support.
• Price pressures have eased faster than expected, with ADB cutting its FY26 inflation forecast to 3.1% and noting RBI rate cuts to 5.5% and planned CRR reductions that have lowered lending rates.
• The fiscal deficit is likely to exceed the 4.4% budget target due to GST cuts and steady spending but remain below FY25’s 4.7%, while the current account gap is seen widening to 0.9% in FY26 and 1.1% in FY27.
• Forecasts diverge as EY lifts India’s FY26 outlook to 6.7% on GST 2.0 and domestic demand, even as ADB trims developing Asia to 4.8% for 2025 and highlights steeper downgrades in Southeast Asia and a 3% projection for Pakistan.