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The Asian Development Bank (ADB) raised its growth forecast for the Indian economy on Friday. It cited robust domestic consumption and favorable trade conditions, even as it flagged escalating geopolitical tensions in West Asia as a major threat to regional stability.

In its April 2026 report, the ADB projected India’s GDP growth to remain robust at 6.9% for the current fiscal year, FY26, and accelerate to 7.3% in FY27. This marks a significant upgrade from the 6.5% previously projected for the 2026-27 period. The bank noted that India remains one of the fastest-growing major economies, supported by a virtuous cycle of steady public investment and resilient household spending.

The ADB's outlook follows a similar move by the Reserve Bank of India (RBI), which earlier this week estimated real GDP growth for FY26 at a more optimistic 7.6%.

Drivers Of Expansion 

According to the ADB, India’s economic momentum is being underpinned by several domestic and external factors:

• The recent conclusion of trade agreements with the European Union and lower tariffs on Indian goods exported to the United States have provided a boost to the manufacturing sector.
• Expected government salary increases and a recovery in the rural economy are projected to drive private consumption.
• Easing financing conditions following the RBI's recent pivot have incentivized corporate capital expenditure.

The West Asia Risk Factor 

Despite the upgrade, the ADB cautioned regarding the ongoing conflict in the Middle East. "A prolonged conflict could undermine India’s macroeconomic performance through multiple channels, primarily higher energy prices and disruptions to trade flows," the report stated.

The bank projected inflation to more than double from 2.1% in FY25 to 4.5% in FY26, driven by a rebound in food prices and higher global crude oil benchmarks, which have recently hovered near the $96 mark.

The "Developing Asia" region is expected to grow at 5.1% in both 2026 and 2027. While South Asia remains the fastest-growing sub-region, the ADB warned that an abrupt tightening in global financial conditions could raise borrowing costs and hit credit markets across the continent. For India, the bank expects inflation to eventually cool to 4.0% in FY27, provided global oil prices moderate and domestic supply chains stabilize.