New Delhi

The Asian Development Bank has projected India’s GDP growth to remain robust at 6.9 per cent in FY27, with an improvement to 7.3 per cent in FY28, driven by strong domestic demand and easing financial conditions.

In its Asian Development Outlook report, the ADB said growth will be supported by lower US tariffs on Indian goods and sustained internal consumption, even as global uncertainties persist.

The Indian economy had expanded by 7.6 per cent in FY26, up from 7.1 per cent in the previous year, aided by resilient household consumption, tax cuts, and steady public investment.

However, the report flagged risks from geopolitical tensions, particularly in the Middle East, which could impact India through higher energy prices, disrupted trade flows, and weaker remittances.

On inflation, the ADB expects a notable rise to 4.5 per cent in FY27, more than double the 2.1 per cent recorded in FY26. This increase is attributed to rebounding food prices, elevated global oil rates, currency weakness, and rising precious metal prices. Inflation is projected to ease to 4 per cent in FY28, assuming moderation in oil prices.

Despite near-term pressures on consumption due to rising prices, the ADB remains optimistic about medium-term growth. It expects demand to strengthen further with anticipated salary and pension hikes for government employees, along with increased investment driven by regulatory reforms.

The report also highlighted the potential boost from trade agreements, particularly with the European Union, which are expected to support export growth.

At the same time, higher global oil prices linked to Middle East tensions could widen India’s current account deficit and increase fiscal pressure if fuel subsidies rise to cushion domestic consumers.

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The ADB noted that while limiting the pass-through of global fuel prices could help control inflation in the short term, it may strain government finances.