The Asian Development Bank (ADB) has projected India’s gross domestic product (GDP) to grow by 6.5% in both fiscal years FY2025, ending 31 March 2026, and FY2026, according to the Asian Development Outlook (ADO) September 2025. While the FY2025 forecast remains unchanged from July 2025, the FY2026 estimate has been revised downward from 6.7% to 6.5% due to expected headwinds from newly imposed US tariffs on Indian exports. Resilient domestic consumption and strong performance in service exports are expected to cushion the impact of these trade barriers.
ADB Country Director for India, Mio Oka, stated that despite ongoing trade challenges, India’s long-term growth trajectory remains optimistic. The tariffs are likely to weigh on growth, but the overall impact on GDP is expected to be contained by India’s relatively lower exposure to the US market, increased exports to alternative markets, continued strength in services exports, and a pickup in domestic demand.
Policy measures such as reductions in GST rates, cuts in personal income tax, and employment-linked fiscal incentives for workers and firms are expected to boost consumption across both rural and urban regions, reinforcing overall economic momentum.
The services sector is projected to remain the primary driver of growth in FY2025 and FY2026, supported by rising domestic consumption and export demand. Agriculture is expected to perform strongly due to favorable monsoon rainfall. Investment growth may remain muted in FY2025 amid global trade uncertainties, although government spending on urban infrastructure, particularly through the urban challenge fund, is set to increase in FY2026. Manufacturing will continue to face pressure from trade barriers, while housing construction is expected to remain robust.
Inflation is projected to ease to 3.1% in FY2025 but may rise towards the inflation target in FY2026. With significant rate cuts already undertaken by monetary authorities, further cuts are expected to be slower.
The report highlights several near-term risks, including escalating trade tensions, global geopolitical uncertainties that could dampen demand for India’s exports, and domestic disruptions from ongoing flood-related shocks. Conversely, growth could be boosted if US tariffs on India are lowered to levels more consistent with those applied to other countries in Asia and the Pacific.
ADB, established in 1966 and owned by 69 members, supports inclusive, resilient, and sustainable growth across Asia and the Pacific. The bank works with its members and partners to address complex challenges through innovative financial tools and strategic partnerships, aiming to enhance infrastructure, improve lives, and safeguard the environment.
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