ADB trims India’s FY25 growth forecast to 6.5% as policy uncertainty, US tariffs hit exports

“Despite the downward revision, India remains one of the fastest-growing major economies globally,” the Manila-headquartered lender noted in its latest Asian Development Outlook, reported Moneycontrol.

Growth projections for FY2027 were also revised downward to 6.7 percent, from the 6.8 percent forecast in April.

However, the bank said services and agriculture are likely to fuel growth in FY2026, supported by an above-normal monsoon.

Latest data released on July 21 showed crop output had risen 4 percent over the previous year, while the monsoon was tracking 6 percent above normal levels.

Rice and coarse cereals registered double-digit output growth, helping ease price pressures.

With food inflation turning negative for the first time in six years, India’s overall inflation cooled to 2.1 percent in June—a more than six-year low. Reflecting the softer inflation trend, ADB revised its FY2025 forecast to 3.8 percent, from 4.3 percent earlier.

For FY2027, it expects inflation to align with the RBI’s 4 percent midpoint target.

The bank also expressed confidence in India’s fiscal health. “The central government’s fiscal position remains strong, buoyed by higher-than-expected RBI dividends, and is on track to meet its deficit reduction goals,” ADB said.

Easing policy uncertainty and expected rate cuts by the Reserve Bank of India are likely to support a growth rebound in the coming year, the report added.