Indian economy to grow at 6.5% in FY26, US tariffs to weigh on exports: ADB

The Indian economy, despite a robust 7.8 percent growth in the first quarter, faces a significant downturn, with projections now estimating a growth rate of 6.5 percent for the current financial year. This adjustment stems from the anticipated adverse effects of steep US tariffs, which have risen to 50 percent on Indian exports. The Asian Development Bank (ADB) initially forecasted a more optimistic growth rate of 7 percent in its April report; however, the July revision reflects growing concerns about the sustainability of export-driven growth amid escalating trade barriers. The second half of FY26 is particularly vulnerable, as these tariffs are expected to stifle export activity, overshadowing the positive contributions from domestic consumption and government spending that fueled initial growth. The ADB's analysis underscores the dual impact of these tariffs on India's GDP, projecting a ripple effect that will extend into FY27. While resilient domestic demand and service exports may mitigate some of the negative consequences, the overall outlook remains cautious. The implications of these tariffs are profound, suggesting that India's economic trajectory will increasingly depend on internal factors rather than external trade dynamics. Policymakers must navigate this challenging landscape by fostering domestic industries and enhancing competitiveness to offset the potential downturn in export revenues. The situation calls for strategic interventions to bolster economic resilience in the face of external shocks.

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