ADB Cuts India’s FY27 Growth Forecast To 6.6%, Flags Rising Oil Prices As Key Risk

The Asian Development Bank has trimmed India's FY27 GDP growth forecast to 6.6 per cent, citing the impact of elevated oil prices on consumer spending and private demand.

While the lender remains optimistic about India's medium-term prospects, it has also raised its inflation outlook, warning that geopolitical tensions and weather-related risks could continue to cloud the economic outlook.

Source : ABPLIVE AI

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Key points generated by AI, verified by newsroom

• ADB lowered India's FY27 growth forecast to 6.6%.
• High oil prices dampened household spending, private demand.
• FY27 inflation forecast raised to 5.2% on rising prices.

India's economic growth is expected to moderate in FY27 as persistently high oil prices continue to weigh on household spending and private demand, according to the latest assessment by the Asian Development Bank (ADB).

In the July edition of its Asian Development Outlook, the multilateral lender lowered India's FY27 GDP growth forecast to 6.6 per cent, down from the 6.9 per cent projected in April. Even after the downward revision, the estimate remains above the International Monetary Fund's (IMF) latest FY27 projection of 6.4 per cent, reported Business Standard.

Higher Energy Costs Prompt Downgrade

According to the ADB, elevated crude oil prices have increased transportation costs and weakened consumer purchasing power, prompting a reassessment of India's near-term growth prospects.

As reported by Moneycontrol, the lender said sustained energy inflation is likely to dampen private demand, while geopolitical uncertainties and weather-related disruptions to agriculture continue to pose downside risks to the outlook.

India Still Among the Fastest-Growing Major Economies

Despite trimming its forecast, the ADB expects India to remain one of the fastest-growing major economies globally.

The report said growth would continue to be supported by government measures aimed at attracting foreign investment, fuel tax reductions, targeted credit support, resilient services exports and sustained public capital expenditure.

Looking further ahead, the ADB retained its FY28 GDP growth forecast at 7.3 per cent, unchanged from its April outlook. The projection is also higher than the IMF's FY28 estimate of 6.7 per cent.

According to the ADB, stronger global conditions and improved export competitiveness arising from trade agreements are expected to support growth over the medium term.

Inflation Outlook Revised Higher

Alongside the growth revision, the ADB also raised its inflation forecast for India.

The lender now expects consumer inflation to average 5.2 per cent in FY27, up from the 4.5 per cent projected in April. The revision reflects the impact of higher oil and food prices, as well as the depreciation of the rupee.

For FY28, however, the ADB retained its inflation forecast at 4 per cent.

South Asia and Developing Asia Also Face Slower Growth

The report also highlighted a weaker outlook across the wider region.

The ADB lowered its 2026 growth forecast for South Asia to 6.0 per cent, compared with 6.3 per cent estimated earlier, citing higher oil prices, rising freight costs and uncertainty surrounding remittance flows.

Across developing Asia and the Pacific, the lender reduced its 2026 growth forecast to 4.9 per cent from 5.1 per cent.

According to the report, the prolonged conflict in West Asia has disrupted global energy supplies and supply chains, increasing production costs and slowing economic activity across several economies.