Axis Bank Expects India GDP To Grow 7.5 per cent

Mumbai: India’s economy is expected to grow above 7.5 per cent in real terms in FY27, supported by easing fiscal and monetary conditions, low inflation, and ongoing regulatory reforms, according to Axis Bank’s India Economic Outlook 2026 report.

“With fiscal and monetary headwinds receding, GDP growth has picked up in FY26. In FY27, the pace of fiscal consolidation should slow further (20bps), and lagged effects of monetary easing should become visible, pushing growth to 7.5 per cent (above trend),” said Neelkanth Mishra, chief economist at Axis Bank, while unveiling the report.

Mishra also ruled out any repo rate cuts from the RBI on expectation of a rise in headline inflation. The report said that median inflation, a better gauge of underlying price pressures, has been stable near 3 per cent for 18 months and signals persistent slack in the economy. The Bank expects a rebound in food prices despite the above-trend and expects FY27 headline inflation to average 4 per cent.

Speaking about rupee, Mishra downplayed concerns after the rupee weakened past 91 to the dollar, calling it a “mild but not wild depreciation. The report projected rupee at 90 to the dollar by June 2026 and 92 by June 2027, with the pace of depreciation dependent on the evolution of capital flows and global risk appetite.

On the fiscal front, the pace of consolidation is expected to slow further, with the fiscal deficit projected to narrow to around 4.2 per cent of GDP in FY27.

Improved debt management and rising demand for government securities could help the benchmark 10-year government bond yield drift lower to around 6.1% by FY27, the report added. Axis Bank expects the current account deficit to widen a notch, to 1.2 per cent of GDP in FY26 and 1.3 per cent in FY27, while the surge in capital outflows seen in 2Q/3Q of FY26 will likely abate.