The Asian Development Bank on Wednesday raised its forecast for India’s GDP by 0.7 percentage points to 7.2% in FY26, reflecting a stronger expansion in the third quarter as tax cuts supported consumption.

“The forecast for 2026 remains unchanged at 6.5 percent,” the ADB said in its Asian Development Outlook, December 2025, which was released on Wednesday.

ADB joins a few other agencies that have pegged India’s GDP growth estimates at close to 7.5% following the rationalization of the Goods and Services Tax (GST) rates, which is expected to boost consumption, as well as the income tax cuts announced in the Union Budget 2025-26.

The finance ministry expects the economy to grow by more than 7% this fiscal, while the Reserve Bank of India has pegged real GDP growth for FY26 at 7.3%.

The GST rate cuts that came into effect on September 22 led to record sales of automobiles and consumer goods. GDP growth in the second quarter was 8.2% higher than expected, after growth of 7.8% in the first quarter. It is seen that the economy has grown by 8% in the first half of the fiscal year. The impact of the GST cuts is also expected to continue in the third quarter, boosting growth for the period.

“Growth in India beat expectations as GDP expanded by 8.2% in the second quarter of the current fiscal year (July-September 2025), the fastest growth in six quarters, driven by strong private consumption and despite muted public consumption,” the report said.

It also noted that India’s exports were also resilient, notably rising in the US through July, boosted by tariff-free sectors such as smartphones and pharmaceuticals and front-loading in other sectors.

“Boosted by stronger-than-expected growth in India, the Asia-Pacific region’s economy is now forecast to expand by 5.1% this year, compared with a forecast of 4.8% in September,” the report added, adding that the upgrade was due to stronger-than-expected growth in India, driven by strong domestic export performance in the region’s economy, domestic export and solid performance.

Inflation in India eased to 0.3% in October, driven by a sharp fall in food prices. “This decline was due to reductions in VAT and food price deflation for the second consecutive month, supported by favorable agricultural production and favorable weather conditions,” the report said.

Inflation in developing Asia and the Pacific is expected to ease further to 1.6 percent this year, compared with a projection of 1.7 percent in September, the report said, adding that this mainly reflected lower-than-expected food inflation in India. The region’s inflation forecast for next year remains at 2.1%, he added.