Asian Development Bank Raises Growth Forecasts for India and Developing Asia

The Asian Development Bank (ADB) has revised its growth projections for developing Asia and the Pacific, citing strong demand for high-tech products and India's robust economic performance. The ADB now forecasts a growth rate of 5.1% for the region in 2025, an increase from the previous estimate of 4.8% made in September. This adjustment reflects a broader trend of economic resilience across 46 economies, excluding Japan, Australia, and New Zealand. The ADB also raised its 2026 growth forecast to 4.6%, up from 4.5%, attributing this to reduced trade uncertainties following several U.S. trade agreements.

ADB lifts India's FY26 growth forecast to 7.2%Reuters

India's economy is projected to grow by 7.2% in the current financial year, a significant increase from the earlier forecast of 6.5%. This upward revision is largely due to a stronger-than-expected second-quarter performance, which saw India's GDP rise to 8.2%. The growth is driven by robust domestic consumption, supported by recent goods and services tax (GST) rate cuts, and an expansion in the manufacturing and services sectors. Despite potential challenges in the upcoming fiscal year, including a less favorable base effect, the ADB anticipates that policy measures such as labor market reforms and credit support for exporters will help sustain economic momentum.

ADB lifts India's FY26 growth forecast to 7.2%Reuters

The ADB's report highlights that South Asia is expected to grow by 6.5% this year, up from a previous forecast of 5.9%, largely due to India's strong domestic demand. Southeast Asia's growth is also projected to improve to 4.5%, reflecting a slight increase from earlier estimates. However, the report notes that risks remain, including global uncertainties, climate-related disruptions, and domestic political developments. Recent severe flooding in Indonesia, Thailand, and Malaysia, which resulted in significant casualties and displacement, exemplifies these vulnerabilities.

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Albert Park, ADB's chief economist, emphasized the importance of continued openness to trade and investment in sustaining growth across the region. He stated, "Asia and the Pacific's solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty over the past year."

ADB lifts India's FY26 growth forecast to 7.2%Reuters

Despite the positive outlook, some analysts caution that the ongoing trade tensions, particularly between the U.S. and India, could pose significant risks to sustained growth. The U.S. has imposed a 50% tariff on India, including penalties for importing Russian oil, which could dampen export growth and economic stability.

ADB lifts India's FY26 growth forecast to 7.2%

While the ADB has raised its growth forecasts, there are concerns about the accuracy of these projections amid fluctuating global economic conditions. The potential for renewed trade disputes and the impact of domestic policy changes remain critical factors that could influence future growth trajectories.

ADB lifts India's FY26 growth forecast to 7.2%

"The strong growth is attributable to robust expansion of the manufacturing and services sectors on the supply side and consumption and investment on the demand side." — Asian Development Bank

ADB lifts India's FY26 growth forecast to 7.2%

"Possible re-escalations of tariffs and trade policy uncertainty, and intensification of financial market volatility, remain significant downside risks for the outlook." — Asian Development Bank

Reuters