The Asian Development Bank (ADB) on Tuesday projected India's economic growth at 6.5 per cent in both 2025 (FY26) and 2026 (FY27), while reducing its growth projection for developing Asia and the Pacific by 0.1 percentage points for this year and 0.2 points next year. The downgrade is with the backdrop of a changing global trade pattern driven by tariffs and updated trade agreements.
India's GDP grew 7.6 per cent in the first half of 2025, supported mainly by strong public capital spending, which balanced softer net exports and consumption despite ongoing resilience in rural demand, the ADB said in a statement.
"Industrial growth also picked up in India, with manufacturing and construction leading the way, balancing weakness in mining and utilities," the report added.
Manufacturing picked up in India and most ASEAN countries, while India's services PMI stayed firm, driven by increasing demand in recreation and travel services.
"Rice prices are also expected to soften with favorable weather conditions and historic harvests in India, the largest exporter of rice in the world," the report further stated.
The ADB warned that increased tariffs from the United States and persistent trade uncertainties will continue to dampen regional growth.
Inflation in developing Asia is forecasted to ease to 1.7 per cent this year, supported by lower food and energy prices, before rising moderately to 2.1 per cent next year as food costs normalize.
India's CPI inflation stood at 2.07 per cent in August, significantly lower than last year's 3.7 per cent. Food prices declined for the third straight month, dropping 0.7 per cent from a year earlier, led by declines in the cost of vegetables, pulses, and spices.
"US tariffs are now at historic levels and trade uncertainty across the world remains at very high levels," stated ADB Chief Economist Albert Park.
Growth in developing Asia and the Pacific has been resilient this year as a result of high-quality exports and strong domestic demand, but the deteriorating external environment is affecting the outlook. In the wake of the new global trade environment, it is important for governments to continue promoting good macroeconomic management, openness, and deeper regional integration," Park added.
The PRC's growth outlook is unchanged, with policy assistance due to alleviate the impact of rising tariffs and continued weakness in the property sector. The PRC's economy is expected to grow 4.7 per cent in the current year and 4.3 per cent in the next year.
Southeast Asian economies have been downgraded the most in growth projections, hit by softer international demand and increased trade uncertainties. Regional growth is now forecast at 4.3 per cent for both 2025 and 2026, revised 0.4 percentage points lower than April's projections for both years.
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