Asian Development Bank lowers India's FY26 growth forecast to 6.5% over US tariffs

Indian Express

6 days ago

The Asian Development Bank (ADB) on Wednesday lowered India's growth forecast for FY26 to 6.5 per cent, down from 6.7 per cent projected in April 2025, citing the impact of US baseline tariffs and associated policy uncertainty.
The regional development bank's revision comes as India remains engaged in high-stakes trade deal negotiations. However, finalising a deal before the August 1 deadline for reciprocal tariffs appears unlikely due to differences over market access for agriculture.
'This revision is primarily due to the impact of US baseline tariffs and associated policy uncertainty, in addition to the effects of lower global growth and the direct impact of additional US tariffs on investment flows. Despite this, economic activity remains robust, with domestic consumption expected to grow strongly on the back of a revival in rural demand,' the bank said.
However, it added that India's services and agriculture sectors are expected to be key drivers of growth, with the latter supported by a forecast of above-normal monsoon rains. The Central government's fiscal position remains strong, bolstered by higher-than-expected dividends from the Reserve Bank of India, and it is on track to meet its targeted reduction in the fiscal deficit.
The ADB also revised India's inflation forecast for FY26 to 3.8 per cent, down from 4.3 per cent projected in April, due to a faster-than-expected decline in food prices following improved agricultural output.
Meanwhile, India's GDP growth forecast for FY27 was revised down to 6.7 per cent, from the April 2025 projection of 6.8 per cent.
Earlier this week, The Indian Express reported that Indian negotiators concluded another round of talks in Washington in July, and that a US team led by the US Trade Representative for South and Central Asia, Brendan Lynch, is expected to visit India in mid-August.
This fresh round of talks, beyond the August 1 deadline, comes amid rising suspense over whether India will face 26 per cent reciprocal tariffs starting that date. US Commerce Secretary Howard Lutnick on Sunday reiterated that August 1 is a 'hard deadline' for countries to begin paying tariffs.
'That's a hard deadline. So on 1 August, the new tariff rates will come in… Nothing stops countries from talking to us after 1 August, but they're going to start paying the tariffs on 1 August,' Lutnick said in a television interview.
Notably, US President Donald Trump's deadline for the implementation of reciprocal tariffs has shifted multiple times. While Trump has reiterated that a deal with India is close, the country could face tariffs of up to 26 per cent if both sides fail to reach an agreement.
Ravi Dutta Mishra is a Principal Correspondent with The Indian Express, covering policy issues related to trade, commerce, and banking. He has over five years of experience and has previously worked with Mint, CNBC-TV18, and other news outlets. ... Read More