Overview
- The IMF cut India’s FY27 growth forecast to 6.4% while the Asian Development Bank lowered its FY27 estimate to 6.6%, with both lenders pointing to higher energy costs as the main driver of the revisions.
- The ADB also raised India’s FY27 inflation forecast to 5.2% and warned that a weaker rupee and higher food prices from heatwaves will add to household price pressures.
- Citing the July economic updates, the lenders said supply disruptions and export restrictions linked to attacks around the Strait of Hormuz pushed up oil, gas and fertilizer prices and squeezed real incomes across the region.
- Both institutions noted that rapid, concentrated investment tied to artificial intelligence and technology demand is cushioning some economies but will produce uneven gains across countries based on their participation in tech value chains.
- Policymakers face tighter tradeoffs as higher inflation and import bills strain fiscal and external balances, prompting calls for targeted support, fuel tax adjustments, fiscal consolidation, and rebuilding buffers to guard against further Middle East escalation.