India’s Economy Expected to Grow 6.5% in FY26, ADB Says

NewsDesk Milli Chronicle September 30, 2025September 30, 2025 Asian Development Bank India, FY26 economic outlook India, GST impact India, India capital expenditure, India current account deficit, India domestic consumption, India FDI inflows, India fiscal deficit 2025, India GDP growth 2025, India inflation 2025, India international reserves, India macroeconomic update, India services sector growth, India trade and exports, Indian economic resilience, Indian economy forecast, Indian exports outlook, Indian government spending, Indian monetary policy, Reserve Bank of India repo rate

New Delhi – India’s economy is projected to grow 6.5% in the current financial year, the Asian Development Bank (ADB) said in its latest report, slightly lower than the 7% forecast in April. The revision comes amid concerns over higher US tariffs affecting Indian exports.

The Asian Development Outlook (ADO) September 2025 report noted that GDP growth was strong in the first quarter of FY26, driven by robust domestic consumption and government spending, but rising US tariffs on exports are expected to moderate growth in the second half of the year and into FY27. Despite these challenges, net exports are expected to subtract only moderately from growth, supported by resilient service exports and increasing trade with other countries.

The report also highlighted that India’s fiscal deficit may exceed the budgeted 4.4% of GDP, partly due to slower tax revenue growth following recent GST adjustments. However, government spending has remained on track, with capital expenditure up 32.8% and current expenditure rising 17.1%. Subsidies overall fell 9.6%, while targeted increases, such as a 36.9% rise in fertiliser subsidies, aim to support agriculture.

The Reserve Bank of India (RBI) has taken measures to support growth, including lowering the repo rate to 5.5%—the lowest since August 2022—and reducing the cash reserve ratio by 100 basis points. These steps have led to lower lending rates on new rupee loans and decreased yields on 10-year government securities, promoting liquidity and investment.

Inflation is expected to remain moderate at 3.1% in FY26, with core inflation close to 4%. FY27 may see a slight increase in food price-driven inflation, but overall price stability is expected to continue.

India’s current account deficit is projected to widen modestly from 0.6% in FY25 to 0.9% in FY26 and 1.1% in FY27. Lower net petroleum imports, strong service exports, and remittances are expected to help maintain a stable external position. International reserves are anticipated to remain robust despite global uncertainties.

While foreign direct investment (FDI) inflows remain subdued amid trade volatility, the report emphasized strong domestic demand, supportive fiscal and monetary policies, and a resilient services sector as key factors sustaining economic growth.

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