The Asian Development Bank has lowered its growth forecast for India in the fiscal year starting April 2026 to 6.6 per cent. The original estimate was higher, reflecting earlier optimism about India’s economic trajectory. The revision comes as energy prices remain elevated and global demand shows signs of weakening, creating headwinds for growth.
Energy prices have stayed high since Russia’s invasion of Ukraine disrupted global oil and gas supplies two years ago. India imports about 80 per cent of its oil from abroad, making the country particularly exposed to international price swings. When energy costs rise, everything gets more expensive: fuel for vehicles, electricity for homes and factories, transport for goods. Businesses reduce spending on expansion, and ordinary people cut back on purchases they can delay.
Global demand matters directly to India’s growth because the country exports goods, services and talent worldwide. When richer countries face recession or slowdown, they import less. Indian exporters, from textiles to software companies, earn less. This affects job creation and wage growth in export-dependent sectors. The slowdown in global demand is now factoring into the ADB’s revised estimate.
A 6.6 per cent growth rate is still respectable when compared to growth in developed countries like the US or Europe. But for India, it represents a step down from the higher double-digit growth rates the country has sometimes achieved. The ADB’s downgrade signals that the easy gains are behind, and the economy now faces real constraints.
The impact of slower growth will not be evenly distributed. Large companies with international operations and strong balance sheets can typically manage better through economic slowdowns. They can delay expansions or shift production to cheaper locations. Small and medium businesses, which employ the majority of India’s workforce, have fewer options. Those dependent on domestic demand will see customers cut spending. Those importing raw materials will face higher costs that they cannot fully pass to customers. Workers in these sectors may experience slower wage growth or reduced job opportunities.
The ADB typically revises its forecasts several times each year as new economic data becomes available. This downgrade is the result of the bank’s latest assessment. India’s own economic agencies, including the Ministry of Finance and the Reserve Bank, will likely review their own forecasts in response. The downgrade may also influence government decisions on spending and interest rate policy.
Source: ET Economy
