Just last week, America’s rating agencies had expressed confidence in India’s growth. Now Asian Development Bank i.e. ADB has also expressed confidence in India’s growth. The Asian Development Bank has estimated that India’s economic growth rate may be 6.9 percent in the current financial year 2026-27. Whereas in the next financial year it is likely to be 7.3 percent.
Why is there confidence in India’s growth
Supported by strong domestic demand, easy financing conditions and low US tariffs on Indian goods, the Asian Development Bank (ADB) said in its Asian Development Outlook report that if the conflict in West Asia continues for a long time, it could adversely affect India’s macroeconomic performance through multiple channels. These include increase in energy prices, disruption in trade flows and reduction in remittances as this sector remains important to India’s external sector.
Fast growth may be seen in the economy
ADB estimated that inflation could increase from 2.1 percent in 2025-26 to 4.5 percent in the current financial year due to a rebound in food prices after an earlier decline, rise in global oil prices, currency weakness and rising prices of precious metals. Due to softening oil prices in the next financial year 2027-28, it is expected to decrease to four percent. The Indian economy is expected to register a growth of 7.6 percent in the last financial year 2025-26, which is more than 7.1 percent in 2024-25. The main reasons for this growth are believed to be reduction in Income Tax and Goods and Services Tax (GST), strong domestic consumption due to fall in food prices and stable public investment.
Revealed in this report
The report said that despite the worsening global economic and geopolitical environment, India’s growth rate is expected to remain strong at 6.9 percent in the financial year 2026-27. This activity will be driven by strong domestic demand, supported by easy financing conditions and low US tariffs on Indian goods. ADB said growth could accelerate to 7.3 percent in 2027-28, supported by domestic reforms, the impact of trade agreements with the European Union (EU), and government wage growth. In its Asian Development Outlook report released in December 2025, ADB projected India’s growth rate for 2026-27 The GDP growth rate was estimated to be 6.5 percent.
There are challenges on these fronts
Although rising prices of food and petroleum products in the current financial year may put some pressure on private consumption due to increase in inflation, the next financial year may see improvement in growth rate due to increase in salaries and pensions of government employees and strengthening of domestic demand due to increase in investment. According to the report, external demand is also expected to strengthen due to the boost in exports from the trade agreement with the European Union. The increase in global oil prices due to the West Asia crisis will increase pressure on inflation, current account deficit may increase and economic growth may be affected due to increase in costs. However, its impact will depend on the magnitude of impact on domestic fuel prices.