ADB Lowers India’s FY25 GDP Growth Forecast to 6.5%, Citing Trade Uncertainty and Weak Investment.
Economy Business
On 11–12 December 2024, the Manila-headquartered Asian Development Bank (ADB) revised its GDP growth projections for India, trimming its FY25 forecast to 6.5% from an earlier 7%. This adjustment reflects concerns over slowing private investment, constrained housing demand, and global trade tensions.
- ADB cited a sharp drop in Q2 FY25 growth to 5.4%—a seven-quarter low, following a slowdown in manufacturing output (3.6% YoY), stricter prudential norms on unsecured loans, and a slowdown in government capital spending. Despite strong services (7.1%) and agriculture (3.5%) growth, overall momentum lagged behind expectations.
- In its July 2025 Asian Development Outlook, ADB further revised India’s FY26 GDP forecast to 6.5% (from 6.7%), pointing to elevated U.S. tariffs, ongoing policy uncertainty, and weaker global demand—especially in export markets—as key growth impediments.
- While retaining its inflation estimate for FY25 at 4.7%, ADB lowered its FY26 projection to 3.8%, citing declining food and energy prices. The outlook assumes that lower inflation will provide fiscal room for further monetary easing in early 2026.
Main Point :- (i) Despite the downgrade, India’s economy demonstrated resilience with a 7.4% growth in Q4 FY25, driven by rural revival, strong consumer demand, and robust services sector activity. ADB underscores that these fundamentals may support a gradual recovery in forthcoming quarters.
(ii) ADB projects FY26 GDP growth at 6.5%, upwardly revising it to 7.0% for FY27, assuming stabilization in investment flows, favorable monsoon-induced agricultural strength, and continued domestic demand. The forecast anticipates private investment recovery alongside stronger capital expenditure after fiscal headwinds ease.
President: Masato Kanda
Headquarters: Mandaluyong City, Philippines
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