India’s Growth Stays on Track: ADB Holds GDP Forecast at 6.5% Despite Global Headwinds

At a time when the world economy is wrestling with uncertainties—from trade wars to geopolitical tensions—India continues to stand tall with its growth story. The Asian Development Bank (ADB), in its latest Asian Development Outlook (September 2025), has kept India’s GDP growth forecast steady at 6.5% for FY2025, signaling confidence in the country’s economic resilience.

But the road ahead isn’t without bumps. While the FY2025 projection remains unchanged from ADB’s July estimates, the outlook for FY2026 has been revised slightly downward—from 6.7% to 6.5%. The reason? A fresh wave of US tariffs on Indian exports, which threatens to slow momentum in the manufacturing sector.

Domestic Strength, Global Uncertainty

Despite these external shocks, ADB believes India’s growth engine will keep humming, largely powered by domestic consumption and services exports. “The implementation of tariffs will weigh on growth, but the overall impact on GDP is expected to be contained,” said Mio Oka, ADB Country Director for India. She noted India’s ability to diversify export markets and its strong consumption-driven economy as key buffers against the global slowdown.

In fact, services are set to remain India’s star performer—driven by IT, digital exports, and strong global demand for Indian capabilities. Agriculture, too, is likely to shine this year thanks to favorable monsoon rains, ensuring healthy rural demand.

Policy Push and Consumption Boost

Recent government measures have also played their part in cushioning the economy. Cuts in GST and personal income tax, combined with employment-linked incentives, are expected to inject fresh energy into both urban and rural markets. These policy moves, ADB suggests, will encourage spending, improve household confidence, and support businesses across sectors.

On the investment front, while global trade uncertainties will keep manufacturing under pressure, other areas offer hope. Housing construction and government-led infrastructure projects—particularly through the Urban Challenge Fund—are expected to pick up steam from FY2026, offering a fresh push to economic activity.

Inflation and Monetary Policy Outlook

On the price front, ADB projects inflation to cool significantly to 3.1% in FY2025, before inching closer to the Reserve Bank of India’s target range the following year. The RBI, which has already introduced a series of rate cuts, may now slow the pace of monetary easing as growth stabilizes and inflation trends stay under control.

However, the report doesn’t paint an entirely rosy picture. ADB warns of multiple risks that could disrupt the growth path:

• Escalating trade tensions and unpredictable tariff decisions.

• Geopolitical uncertainties that could dampen global demand.

• Domestic climate shocks, particularly flood-related disruptions that affect agriculture and rural incomes.

On the flip side, growth prospects could brighten if the US eases its tariff stance on India, similar to concessions extended to other Asian economies.

India in the Asian Context

The ADB—founded in 1966 and jointly owned by 69 members—has long been a partner in shaping Asia’s growth trajectory. With India now a central pillar in the region’s economic story, ADB’s forecast highlights both the strengths and vulnerabilities of the country’s growth model.

For now, one message stands clear: India’s growth remains resilient, even as global trade winds turn turbulent. The mix of strong consumption, robust services, and policy support is expected to keep the economy moving forward, even if the journey ahead is marked by uncertainty.