ADB Raises India FY27 Growth Forecast To 7% On Strong Investment, Services Export Growth

The Asian Development Bank (ADB) has raised India's growth forecast for fiscal year 2027 (FY27) to 7%, up from the previous estimate of 6.6%. The revision comes after stronger-than-expected economic performance in the first quarter of FY27, when India's GDP grew by 7.8% year-on-year. Services exports played a crucial role in driving growth, expanding by 10% thanks to a 12.1% increase in financial, real estate, and professional services.

Manufacturing growth also contributed significantly, with a 9.2% increase driven by sectors such as electronics, textiles, and rubber and plastics.

Investment activity showed a strong upward trend, with gross fixed capital formation rising by 11.9% in the first quarter, the fastest pace in four years. Both government spending and private sector investment fueled this expansion. ADB expects the momentum in investment to continue due to low interest rates, higher public capital expenditure, and improved corporate balance sheets. Private investment is projected to remain robust in areas like data centers and energy projects.

ADB also lowered its inflation forecast for FY27 to 5% from 5.2%, attributing the reduction to limited transmission of higher global energy prices to consumers, thanks to government measures. The bank retains its FY28 inflation forecast at 4%, anticipating lower energy prices and improved agricultural supplies under normal monsoon conditions.

However, the bank warns of risks stemming from geopolitical tensions, particularly in the Middle East, and weather uncertainties due to El Niño. A delayed monsoon withdrawal and higher temperatures could adversely affect crop yields and post-harvest losses, especially due to lower reservoir levels compared to the previous year.