ADB Cuts India’s Growth Forecast To 6.5% On US Tariffs

03 Oct 2025 CW Team

The Asian Development Bank (ADB) has lowered India’s growth forecast for the current financial year to 6.5 per cent, down from 6.7 per cent projected in April, citing the impact of steep 50 per cent tariffs imposed by the United States on imports from India. The forecast for 2026-27 has also been reduced to 6.5 per cent from 6.8 per cent.

In its Asian Development Outlook September 2025 report released on 30 September, ADB also revised growth projections for developing Asia, cutting the 2025 forecast to 4.8 per cent from 4.9 per cent and the 2026 forecast to 4.5 per cent from 4.7 per cent.

“The revisions reflect downgrades for India, hit by steep tariff hikes, and Southeast Asia, affected by a weaker and more uncertain global environment,” the report said. India faces the highest tariff hikes among developing Asian economies, prompting a downgrade in its outlook.

Despite strong first-quarter growth supported by consumption and public investment, ADB warned that higher US tariffs—impacting about 60 per cent of Indian exports to the US—will weigh on growth from the second half of 2025-26 and into 2026-27.

Merchandise exports are expected to rise only modestly, constrained by tariffs on key sectors such as textiles, garments, jewellery, shrimp, and chemicals. By contrast, services exports are projected to remain robust and a critical driver of growth. Investment growth is also expected to be weaker, with corporate investment dampened by global trade uncertainty.

On the domestic front, consumption is likely to outpace earlier estimates, supported by lower food prices and cuts in consumption and income taxes. Inflation for 2025-26 has been revised down to 3.1 per cent, driven by subdued oil prices and a faster-than-expected fall in food prices from higher agricultural output. However, food prices are expected to normalise in 2026-27, pushing inflation back up to 4.2 per cent.

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