ADB Projected India Economy Grow By 6.7% in FY2025

India’s economy continues to demonstrate resilient growth despite global uncertainties. According to the Asian Development Outlook (ADO) April 2025, the Indian GDP is projected to grow by 6.7% in FY2025, driven by higher domestic demand, rising rural incomes, and moderating inflation. The Asian Development Bank (ADB) expects the growth momentum to continue into FY2026, with a forecasted GDP growth of 6.8%, supported by favorable fiscal and monetary policies. However, the Reserve Bank of India (RBI) has slightly revised its own projection down to 6.5%, citing global trade challenges and policy uncertainties.

Key Highlights and Analysis

1. Economic Projections

• ADB Forecast: GDP growth: 6.7% in FY25, 6.8% in FY26
• RBI Forecast: Revised GDP growth from 6.7% to 6.5% for FY25

2. Growth Drivers

Domestic Demand

• Rising consumption due to increased rural incomes
• Urban middle-class and affluent households to contribute via higher disposable income

Inflation

• Projected to moderate to 4.3% in FY26, and further to 4% in FY27
• Expected to boost consumer sentiment and confidence

Policy Measures

• Cuts in personal income tax rates for the middle class
• Repo rate cuts: 50 basis points reduced over two meetings (latest: 6% repo rate)

3. Sectoral Outlook

• Services Sector
• Will remain a key growth engine
• Boosted by business services exports, education, and healthcare
• Agriculture Sector: Strong growth in FY25, supported by robust winter crop sowing (wheat and pulses)
• Manufacturing Sector: Expected to rebound from tepid performance in FY24-25
• Strengthened by regulatory reforms

4. Investment and Infrastructure

• Urban Infrastructure: Backed by a new government fund with ₹100 billion (USD 1.17 billion) allocation

Private Investment

• Short-term challenges due to global uncertainty
• Long-term prospects to improve with lower borrowing costs and reforms

5. Risk Factors

Global Economic Uncertainties

• Slowdown in US economy
• Recently announced US tariffs on Indian exports
• Possible increase in commodity prices

Mitigating Factors

• India’s strong macroeconomic fundamentals
• Policy space for further monetary easing

Disclaimer by ADB

• Forecasts were made before April 2, and do not account for the new US tariffs
• ADO April 2025 includes a regional analysis of how tariffs might affect Asia-Pacific growth