About the Discussion: ADB’s Perspective on India-China Relations

The Asian Development Bank’s (ADB) Chief Economist, Albert Park, recently shared his optimism about the potential benefits of improved relations between India and China. He emphasized that stronger trade and mutual investments between the two Asian giants could help both nations withstand global economic headwinds. The ADB maintained India’s GDP growth forecast at 6.5% for FY26 but trimmed it slightly by 20 basis points, acknowledging short-term challenges amid robust domestic demand and increased private investment.

Why ADB Is Cautiously Optimistic on India’s Growth Path

India’s resilience continues to impress global economists. Despite global uncertainties, the ADB notes that India’s domestic consumption, public investment, and private sector confidence remain strong drivers of growth. Park noted that India’s ability to navigate global challenges stems from its large population, rising infrastructure investments, and improving business environment. He pointed out that even with lower external demand, India’s robust internal market can sustain growth momentum.

He added that high tariffs and global trade disruptions have posed challenges, especially for exporters, but domestic resilience provides a stabilizing cushion. Park suggested that further easing trade tensions and simplifying export procedures could accelerate economic recovery.

How Can Improved India-China Relations Benefit the Region?

Park underlined that cooperation between India and China could boost regional investment and production networks. Both economies face similar challenges — such as moderating exports and global inflation — and stronger bilateral ties could enhance regional demand. He suggested that aligning policy frameworks and promoting trade in sectors like renewable energy, digital infrastructure, and manufacturing could be mutually advantageous.

Stronger India-China relations could also contribute to stability in Asia by promoting cross-border investments and technology transfers. Park stated that cooperation rather than competition would enable both economies to capitalize on their demographic and industrial strengths.

What Are the Key Headwinds for India’s Growth?

Park identified slowing global demand, high borrowing costs, and geopolitical uncertainties as primary headwinds. Yet, he believes India is comparatively better positioned than many economies in the region. The recent moderation in foreign direct investment (FDI) inflows was one area of concern, but government efforts to enhance ease of doing business are expected to attract investors back.

According to him, supportive fiscal policies and a focus on skill development will be essential for sustaining momentum. He also stressed the need for targeted measures to support exporters affected by external shocks such as rising tariffs or geopolitical disruptions.

Why Structural Reforms Continue to Strengthen India’s Outlook

Structural reforms, including Goods and Services Tax (GST) streamlining and income-tax rationalization, have started showing results. Park noted that these measures are boosting fiscal efficiency and improving the business climate. As private investment rises, India’s medium-term growth outlook remains strong despite near-term volatility.

He also emphasized the importance of policies supporting green investments, climate adaptation, and logistics infrastructure. These can not only enhance growth but also attract long-term sustainable financing. In his view, strengthening institutional mechanisms for environmental and industrial resilience could secure India’s competitive edge in the global market.

ADB’s Global View and the Role of Demographics

Park believes India’s demographic advantage is a significant long-term strength. The growing share of the working-age population could sustain consumption and investment demand. However, he cautioned that employment generation and skill development remain critical to fully leveraging this demographic dividend.

He also pointed out that while global economies are facing headwinds from slowing demand, India’s internal consumption base gives it an inherent cushion. Furthermore, its focus on renewable energy, manufacturing, and infrastructure will continue to draw global investors.

Investor Takeaway

India’s strong domestic demand and investment cycle make it one of the most promising markets globally, even as global trade faces headwinds. Any improvement in India-China relations could further strengthen Asia’s overall economic resilience. For investors, monitoring policy moves and regional cooperation developments will be key to capturing upcoming opportunities.

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