On the supply side, manufacturing and services growth are expected to remain strong, aided by domestic reforms and favourable access to foreign markets under newly signed trade deals: Reports
CHENNAI: Despite a worsening global economic and geopolitical environment, growth in India is forecast to remain robust at 6.9 per cent in FY27 and growth is projected to rise to 7.3 per cent in FY28, driven by domestic reforms, the effects of trade agreements with the European Union, and expected government salary increases, finds the ADB. Inflation is projected to more than double from 2.1 per cent in FY26 to 4.5 per cent in FY27 on a rebound in food prices from earlier declines, higher global oil prices, currency weakness, and rising precious metal prices.
From 7.6 per cent in FY26, India’s GDP growth is projected to decline to 6.9 per cent in the current fiscal primarily due to external challenges. Activity will be underpinned by strong domestic demand, supported by easing financing conditions, and lower US tariffs on Indian goods. Higher exports of goods and services offset rising imports, leaving the contribution of net exports to growth broadly neutral.
Rising consumption and investment will drive growth, supported by favourable policies and structural reforms, while a more benign external environment compared to the previous year will bolster exports. On the supply side, manufacturing and services growth are expected to remain strong, aided by domestic reforms and favourable access to foreign markets under newly signed trade deals.
However, a prolonged conflict in the Middle East could undermine India’s macroeconomic performance through multiple channels. These include higher energy prices, disruptions to trade flows, and weaker remittance inflows given the region’s continued importance for India’s external sector.
Growth is projected to rise to 7.3 per cent in FY28, driven by domestic reforms, the effects of trade agreements with the European Union, and expected government salary increases.
Higher global oil prices would put upward pressure on inflation, significantly widen the current account deficit, and weigh on growth by increasing input costs. The extent of the impact would depend on the degree of pass-through to domestic fuel prices. While limited pass-through could cushion the effect on inflation and growth in the near term, it would increase fiscal pressure through higher subsidy requirements.
In India, inflation is projected to more than double from 2.1 per cent in FY26 to 4.5 per cent in FY27 on a rebound in food prices from earlier declines, higher global oil prices, currency weakness, and rising precious metal prices, then ease to 4 per cent in FY28 on account of lower oil prices.
