ADB forecasts Indian FY2016 GDP growth of 7.4%, unchanged from its March projection, while FY2017 growth is also seen unchanged at a faster clip of 7.8%.

Inflation, meanwhile, is expected to average 5.4% in FY2016 with food prices benefiting from a stronger monsoon. Inflationary pressures, though, will move up in FY2017, with the rate seen at 5.8%, against a backdrop of higher global commodity prices and an expected rise in the prices of some services following the introduction of GST.  

The updated assessment notes some risks of slippage in the government's target to reduce the fiscal deficit to 3.5% of GDP for FY2016 due to subdued non-tax revenue and higher current expenditure. However, measures to improve the targeting of subsidies and tax revenue growth should reduce the extent of slippage. A healthy external balance and strong capital inflows have helped the Indian rupee remain relatively stable against the US dollar in 2016.

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