Asian Development Outlook December 2025: India’s Growth Surge, AI-Driven Exports, and Easing Inflation
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure
Ministry of Finance | Reserve Bank of India (RBI)
The Asian Development Bank (ADB)’s Asian Development Outlook: December 2025 report has revised the growth forecast for developing Asia, primarily due to stronger-than-expected performance in India. The regional growth projection for developing Asia is raised by 0.3 percentage points to 5.1% for 2025. This resilience is underpinned by solid consumption and continued export strength, despite rising US tariffs and lingering global uncertainty.
Key developments in the region include:
Growth Drivers: Strong external demand, particularly for electronics and semiconductors, bolstered by the global AI Cycle upturn, is sustaining economic activity. This boosted growth projections for East Asia and specifically in high-income technology exporters like Taipei, China, whose AI-related exports contributed significantly to maintain its growth at a strong 7.6%.
Trade and Tariffs: Trade uncertainty eased slightly in November following US tariff reductions on the PRC and new bilateral trade agreements with some ASEAN economies, which helped mitigate the impact of historically high tariffs. However, the prospect of re-escalated tariff tensions remains a key downside risk.
Inflation: Regional inflation is expected to ease further to 1.6% in 2025. This moderation is largely attributed to lower-than-expected food inflation in India among other factors such as lower energy prices in the region.
What is the AI Cycle upturn in the context of Asian exports? The AI Cycle upturn refers to the recent, sharp acceleration in global demand for high-end electronic components, particularly advanced semiconductor chips and related Information and Communications Technology (ICT) products, driven by investment in Artificial Intelligence (AI) infrastructure and computing power. This strong external demand has boosted exports and manufacturing activity in technology-reliant economies across Asia.
India-Specific Details
The positive outlook for India is the main catalyst for the upward revision of the South Asia subregion’s growth forecast to 6.5% in 2025.
Growth Forecast: India’s GDP growth forecast for the fiscal year (FY) 2025 (ending March 2026) is upgraded by 0.7 percentage points to 7.2% from the 6.5% projected in September. The forecast for FY2026 is maintained at 6.5%.
Drivers: The revision follows stronger-than-expected performance, with GDP expanding by 8.2% in Q2 FY2025 (July–September 2025)—the fastest growth in six quarters. This strong momentum is driven primarily by robust domestic consumption, supported by recent Goods and Services Tax (GST) rate cuts, a robust rural economy, and steady credit growth.
Sectoral Performance: The expansion is broad-based, with robust growth in the manufacturing and services sectors. The services sector, which grew by 9.3% in the first half of FY2025, is expected to continue its strong performance, aided by both domestic and external demand.
Risks and Moderation: Growth is expected to moderate in the second half of FY2025 due to easing of central government capital spending amid fiscal consolidation and softening export growth from elevated US tariffs impacting select Indian exports. Upside potential exists if trade negotiations with the US result in a lower tariff rate for India.
Inflation Outlook: India’s inflation forecast for FY2025 is revised down to 2.6% from 3.1% in September. This decline is due to lower-than-expected food prices, supported by favorable monsoon conditions, strong monsoon crop output, and GST rate cuts in select sectors.
Policy Relevance: The sharp upward revision and underlying domestic demand strength validate recent fiscal and GST rate cuts as effective demand-side stimulus measures. However, the projected second-half moderation due to fiscal consolidation and external tariffs emphasizes the need for continued structural reforms—such as enhanced labor market flexibility and GST simplification—to sustain growth momentum and offset future base effects.
Follow the full news here: Asian Development Outlook (ADO) December 2025