India's GDP Growth Seen At 6.7% In 2025: Asian Development Bank

India's GDP is expected to grow 6.8% this year, driven by strong domestic demand, rising rural incomes, and moderating inflation, according to the Asian Development Bank.

Favourable monetary and fiscal policies are projected to sustain this growth momentum, with a forecasted 6.8% increase in 2026.

Despite global uncertainties, India's resilient growth is attributed to the government's focus on infrastructure development and job creation, said ADB Country Director for India, Mio Oka.

"The further strengthening of the manufacturing sector through regulatory reforms, combined with the already robust services and agriculture sectors and the recently announced tax incentives for the middle class, will help sustain India's strong economic growth trajectory," she said.

The bank clarified that its forecasts do not incorporate the effects of the new US tariffs announced last week, which was beyond the report’s cut-off date.

The ADB report underscores that consumption will be a major growth driver, fuelled by rising rural incomes and increased demand from urban middle-class and affluent households, thanks to reductions in personal income tax rates.

Additionally, it said, moderating inflation is expected to further boost consumer sentiment with rates projected at 4.3% in 2025 before declining slightly to 4% in 2026. The falling inflation would create policy space for more cuts to repo rate even with global financial uncertainty.

The report further said that the services sector will remain a key growth driver, supported by the expansion of business services exports, education, and health services.

The agriculture sector is expected to maintain strong growth in 2025, driven by robust winter crop sowing, particularly wheat and pulses. Meanwhile, the manufacturing sector is anticipated to rebound after experiencing tepid growth in the previous year, it said.

While global economic uncertainties may hinder private investment prospects in the short term, they are expected to improve with the gradual lowering of borrowing costs and planned regulatory reforms aimed at spurring investment, it said.

The report noted a range of near-term growth risks, including uncertainties created by the recent increase in US tariffs on Indian exports and broader global developments that could lead to higher commodity prices.

(With PTI inputs)