The Asian Development Bank (ADB) has raised India’s economic growth forecast for 2025-26 to 7.2 percent, a sharp upgrade from its previous estimate of 6.5 percent. The 0.7 percentage point increase marks a notable shift in the bank’s expectations, driven largely by India’s stronger July-September GDP performance, improved consumption supported by tax cuts, and signs of increasing stability in the government’s fiscal outlook. The revision was published in the Asian Development Outlook (ADO) December 2025, released on December 10, placing India among the fastest-growing major economies in the world for the coming year.
ADB’s decision comes at a time when India has begun showing signs of a broad-based economic revival. Private consumption has risen, supported partly by tax relief measures designed to leave more disposable income in the hands of households. Investment activity has also remained steady, with public capital expenditure continuing to provide a push to infrastructure-led growth. According to the ADB, these factors combined to produce a more robust third-quarter expansion than previously anticipated, far exceeding earlier projections made in September.
For 2026, however, the ADB has kept India’s growth forecast unchanged at 6.5 percent, suggesting that while the coming year will benefit from short-term fiscal and consumption tailwinds, medium-term growth will stabilise at a more moderate pace. The bank noted that structural reforms, productivity gains, labour-market improvements and sustained investment will be crucial if India wishes to maintain strong growth beyond the forecast period.
The ADB also revised its overall economic outlook for developing Asia and the Pacific for 2025 and 2026. The region is now projected to grow 5.1 percent in 2025, up from the 4.8 percent expected earlier. This rise is attributed to stronger than expected export performance, particularly in technology-driven sectors like semiconductors, alongside moderating inflation and stable financial conditions. The growth projection for 2026 has also been adjusted upward by 0.1 percentage points to 4.6 percent.
ADB Chief Economist Albert Park said the region’s economic fundamentals remain sound despite a volatile global environment. “Asia and the Pacific’s solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty over the past year,” he said. Park added that new trade agreements, especially those involving the United States, have helped ease some of the uncertainty surrounding supply chains and market access.
However, he emphasised that the region must continue to focus on maintaining open trade and investment flows. “Trade agreements have partly eased that uncertainty, but external and other challenges could still weigh on the outlook. Governments must continue to foster open trade and investment to sustain resilience and growth,” Park said.
The ADB cautioned that the outlook for Asia and the Pacific is still vulnerable to several risks. Renewed trade tensions, especially between major global economies, could derail export growth. Financial market volatility remains a concern, particularly if global interest rates fluctuate more sharply than expected. Geopolitical pressures, including conflicts affecting supply chains and global commodity markets, also pose a potential threat. A deeper-than-expected slowdown in China’s property market, the ADB warned, could spill over into the region and weigh on overall demand.
India’s improved growth outlook comes at a time when inflation in the region is showing signs of easing. For developing Asia and the Pacific, inflation is now expected to average 1.6 percent in 2025, lower than the earlier estimate of 1.7 percent. This downward revision is driven primarily by lower-than-anticipated food inflation in India, which has helped keep overall inflation levels more contained. The forecast for 2026 remains unchanged at 2.1 percent, reflecting expectations of stable commodity prices and steady supply conditions.
For India, lower food inflation provides much-needed relief, especially after several months of price volatility driven by weather disruptions. Moderating inflation, coupled with tax cuts and rising rural demand, is expected to further support household consumption in 2025-26. The ADB also highlighted India’s stable financial conditions and strong macroeconomic management as important contributors to its improved outlook.
The upward revision of India’s growth forecast also reflects the country’s strong macroeconomic fundamentals, high foreign exchange reserves, steady investment inflows, improving tax collections and a continued push on infrastructure spending. Analysts believe that with the global economy still struggling with uncertainty, India’s domestic demand-driven model gives it a relative advantage, insulating it from some of the external shocks affecting other emerging markets.
However, the ADB cautioned that sustaining growth beyond 2025-26 will depend on continued reforms. Enhancing labour productivity, simplifying regulatory processes, improving logistics, and strengthening digital and physical infrastructure will remain crucial. The bank also stressed the importance of ensuring fiscal discipline even while pushing capital investments, as rising government borrowing can restrict long-term growth prospects.
As India prepares to enter 2025 with a stronger-than-expected economic footing, the ADB’s upgraded forecast adds to a growing chorus of optimism among global financial institutions. While challenges remain, particularly from global risks and regional tensions, the country’s stable macroeconomic environment, resilient domestic demand and improving inflation outlook provide a strong foundation for sustained growth.
With the ADB projecting a sharp rise in India’s growth next year, all eyes will now be on how well the country maintains this momentum, implements reforms, and navigates global uncertainties in the crucial years ahead.
