New Delhi, Apr 10 (PTI) The Asian Development Bank (ADB) on Friday projected India's GDP growth to remain "robust" at 6.9 per cent in the current fiscal, and rise to 7.3 per cent in next fiscal driven by strong domestic demand, and supported by easing financing conditions and lower US tariffs on Indian goods.

In its Asian Development Outlook report, the ADB said a prolonged conflict in the Middle East could undermine India's macroeconomic performance through multiple channels.

These include higher energy prices, disruptions to trade flows, and weaker remittance inflows given the region's continued importance for India's external sector.

It projected inflation to more than double from 2.1 per cent in 2025-26 to 4.5 per cent in the current fiscal due to a rebound in food prices from earlier declines, higher global oil prices, currency weakness, and rising precious metal prices. It projected inflation to ease to 4 per cent in the next fiscal on account of lower oil prices.

The Indian economy grew 7.6 per cent in the previous fiscal (2025-26), faster than the 7.1 per cent recorded in FY2024-25, supported by resilient household consumption due to cut in income tax, GST, and falling food prices, besides steady public investment.

"Despite a worsening global economic and geopolitical environment, growth in India is forecast to remain robust at 6.9 per cent in fiscal year 2026 (2026-27). Activity will be underpinned by strong domestic demand, supported by easing financing conditions, and lower US tariffs on Indian goods," it said.

Growth is projected to rise to 7.3 per cent in FY2027 (2027-28), driven by domestic reforms, the effects of trade agreements with the European Union, and expected government salary increases, ADB added.

In the Asia Development Outlook report released in December, 2025, ADB had projected India's GDP growth at 6.5 per cent for 2026-27 fiscal.

Although rising inflation, especially food and petroleum products, may temper private consumption in the current fiscal, GDP growth in next fiscal would see marked improvement as domestic demand strengthens due to hikes in salaries/pensions of government employees and an uptick in investment benefitting from key regulatory reforms, ADB said.

External demand is expected to strengthen as the benefits from the trade deal with the European Union (EU) boosts exports.

Higher global oil prices due to the Middle East crisis would put upward pressure on inflation, significantly widen the current account deficit, and weigh on growth by increasing input costs. However, the extent of the impact would depend on the degree of pass-through to domestic fuel prices.

"While limited pass-through could cushion the effect on inflation and growth in the near term, it would increase fiscal pressure through higher subsidy requirements," ADB said. PTI JD DR DR

India growth outlook stays robust as domestic demand, easing financing conditions, and trade factors support expansion. India's growth outlook is projected to remain robust in the current fiscal year, supported by strong domestic demand, easing financing conditions, and lower tariffs on Indian goods. The next fiscal year is expected to see higher growth from domestic reforms, trade agreement effects, and expected government salary increases. Inflation is forecast to rise in the current fiscal year due to higher food and oil prices before easing as oil prices soften.