“Growth will be supported by policy interventions to attract more foreign capital, as well as fuel tax cuts, targeted credit support, strong services exports, and public capital expenditure,” the ADB said.

The lender also retained its FY28 growth forecast for India at 7.3 per cent, unchanged from its April outlook.

It said the medium-term outlook is supported by improving global conditions and export competitiveness gained through trade agreements with various partners.

According to the report, elevated energy prices prompted the downward revision in the FY27 growth forecast as they erode real incomes and dampen consumer spending.

It cautioned that risks to the outlook remain tilted to the downside due to heightened geopolitical tensions and weather-related weakness in agriculture.

The ADB also revised India’s inflation forecast for FY27 to 5.2 per cent, while retaining its FY28 inflation forecast at 4 per cent.

For the broader region, the ADB lowered its growth forecast for South Asia to 6.0 per cent in 2026 from 6.3 per cent projected earlier, citing higher oil prices, rising freight costs and uncertainty over remittance flows.

Across developing Asia and the Pacific, the lender trimmed its 2026 growth forecast to 4.9 per cent from 5.1 per cent, saying the prolonged conflict in West Asia has disrupted energy supplies and supply chains, raising production costs and slowing economic activity.

Despite the near-term challenges, the ADB said India’s growth outlook remains among the strongest globally, supported by ongoing reforms, public investment and resilient services exports.