ADB cuts India's FY27 growth forecast to 6.6% on higher oil prices

India's economy is expected to grow 6.6 per cent in FY27, slower than the 6.9 per cent projected in April, as elevated oil and transportation costs weigh on consumer sentiment and private demand, the Asian Development Bank (ADB) said in the July edition of its Asian Development Outlook.

The revised forecast, however, remains more optimistic than the International Monetary Fund's (IMF) latest estimate of 6.4 per cent for FY27.

Why did ADB lower India's growth outlook?

ADB attributed the downgrade to elevated energy prices, which it said are eroding household purchasing power and weighing on private demand.

According to a Moneycontrol report, ADB said higher oil prices have weakened consumer spending, prompting it to lower its FY27 growth forecast. It also warned that risks to the outlook remain tilted to the downside due to heightened geopolitical tensions and weather-induced weakness in agriculture.

Despite the downgrade, ADB expects India to remain one of the world's fastest-growing major economies. "Growth will be supported by policy interventions to attract more foreign capital, as well as fuel tax cuts, targeted credit support, strong services exports, and public capital expenditure," ADB said.

The lender retained its FY28 growth forecast at 7.3 per cent, unchanged from its earlier estimate and higher than the IMF's projection of 6.7 per cent. It said the outlook is underpinned by improved global conditions and export competitiveness gained through trade agreements with various partners.

ADB raises India's inflation forecast

ADB raised its FY27 inflation forecast for India to 5.2 per cent from 4.5 per cent projected in April, reflecting the impact of higher oil and food prices as well as a weaker rupee. It retained its FY28 inflation forecast at 4 per cent.

South Asia growth outlook lowered

ADB also lowered South Asia's growth forecast to 6.0 per cent in 2026 from 6.3 per cent projected earlier, citing higher oil prices, rising freight costs and uncertainty over remittance flows.

Across developing Asia and the Pacific, the lender cut its 2026 growth forecast to 4.9 per cent from 5.1 per cent. It said the prolonged conflict in West Asia has disrupted energy supplies and supply chains, raising production costs and slowing economic activity.