India's Economic Growth Projected At 6.7% In FY25 Amid Rising Domestic Demand: ADB

India’s economy is set to grow by 6.7 per cent in the current financial year, supported by strong domestic consumption, increasing rural incomes, and easing inflation, according to the Asian Development Bank’s latest forecast. The Asian Development Outlook (ADO) April 2025 report highlights that supportive monetary and fiscal policies are likely to sustain economic momentum. The ADB has pegged growth at 6.8 per cent for FY26, with key contributions expected from robust services, agriculture, and a rebounding manufacturing sector.

India’s continued focus on infrastructure development and employment generation has kept growth resilient, even in a volatile global environment, said Mio Oka, ADB’s Country Director for India. She added that recent tax incentives for the middle class and ongoing regulatory reforms in manufacturing are expected to boost long-term expansion.

Despite the optimistic projection from ADB, the Reserve Bank of India (RBI) revised its own GDP growth estimate downward to 6.5 per cent for FY25, citing uncertainties in global trade and policy landscapes.

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Consumer Confidence

Consumer confidence is expected to strengthen further, driven by moderating inflation and rising rural earnings. The ADB report anticipates inflation to ease to 4.3 per cent in FY26 and drop slightly to 4 per cent the following year, potentially providing more room for interest rate cuts.

In a move aligned with these trends, the RBI announced a 25-basis-point reduction in the policy repo rate on Wednesday, bringing it down to 6 per cent. This marks the second consecutive rate cut, totaling 50 basis points across recent Monetary Policy Committee (MPC) meetings.

The report also predicts continued growth in services, particularly in exports of business, education, and health services. Agriculture is expected to remain strong, bolstered by solid winter crop production, especially wheat and pulses. Meanwhile, the manufacturing sector is projected to recover from subdued performance in the previous fiscal year.

Public investment is set to get a boost as well, with a newly established urban infrastructure fund receiving an initial infusion of Rs 100 billion (approximately USD 1.17 billion). However, the report cautions that global headwinds — including new US tariffs on Indian goods and rising commodity prices — could present short-term challenges.

Although the growth projections were finalised before the US announced tariff hikes on April 2, the ADB noted that the report includes a broader analysis of potential implications for Asia-Pacific economies stemming from such trade developments.

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