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

Summary/Static	Details
Why in the news?	ADB Projected India Economy Grow By 6.7% in FY2025
GDP Forecast (ADB)	6.7% (FY25), 6.8% (FY26)
GDP Forecast (RBI)	Revised from 6.7% to 6.5% (FY25)
Inflation Rate	4.3% (FY26), projected to fall to 4% (FY27)
Key Growth Drivers	Domestic demand, rural incomes, tax relief, inflation moderation
Policy Measures	Income tax cuts, repo rate cut to 6%
Repo Rate Reduction	Total 50 bps over two meetings (latest: 25 bps cut)
Key Sectors for Growth	Services (exports, education, healthcare), agriculture, manufacturing
Infrastructure Investment	₹100 billion fund for urban development
Risks Identified	US tariffs, commodity prices, global uncertainties
Mitigation Factors	Stable macroeconomic position, policy flexibility
Forecast Disclaimer	Projections made before US tariff hike on April 2