ADB cuts Indias FY26 development forecast to six.5% on U.S. tariff affect

The Asian Development Bank (ADB) has downgraded India’s development outlook for the present monetary 12 months to six.5% from the 6.7% predicted in April, on account of the affect of the 50% tariffs imposed by the U.S. on imports from India. The outlook for 2026-27 has additionally been revised downwards to six.5% from the sooner prediction of 6.8%.

The ADB, in its Asian Development Outlook September 2025, launched on Tuesday (September 30, 2025), additionally lowered its development forecast for creating Asia to 4.8% for the present 12 months 2025 from its forecast in April of 4.9%. Similarly, the forecast for 2026 has been lower to 4.5% from 4.7%.

“The revisions replicate downgrades for India, hit by steep tariff hikes, and Southeast Asia, pushed by a worse and extra unsure international setting,” the report mentioned. India faces the steepest tariff hikes amongst creating Asian economies, prompting a downgrade in its development outlook.”

The report additional mentioned that, regardless of robust development within the first quarter of the present monetary 12 months, pushed by consumption and public funding, the elevated U.S. tariffs, which it mentioned affected about 60% of products exported to the U.S., will weigh on development beginning within the second half of 2025-26 and in 2026-27. 

“Merchandise exports are anticipated to develop solely modestly, constrained by US tariffs on key exports, whereas exports of providers are anticipated to stay sturdy and a key driver of development,” it mentioned. “Investment development is predicted to be decrease than beforehand forecast, with company funding nonetheless subdued by international commerce uncertainty.” 

The escalation in tariffs is predicted to weigh closely on key export sectors similar to textiles, ready-made clothes, jewellery, shrimp, and chemical substances, the report famous. 

On the opposite hand, nevertheless, it famous that consumption demand is predicted to develop greater than beforehand anticipated, aided by decrease meals costs and cuts to consumption and earnings taxes. 

“The 2025-26 inflation projection for India is revised downward to three.1%, reflecting subdued international oil costs and a faster-than-expected decline in meals costs on account of greater agricultural manufacturing,” the report mentioned. 

However, it added that meals costs are anticipated to normalise in 2026-27, resulting in an upward revision of the inflation forecast to 4.2% for that 12 months.