Mumbai :
India’s growth is
likely to be above trend in FY27, driven by structural and regulatory reforms, lower
borrowing costs, accelerated capital formation, and a cyclical boost from
policy easing, according to Neelkanth Mishra, Chief Economist, Axis Bank
& Head - Global Research, Axis Capital in the Bank’s Outlook
2026 report. Mishra and the Bank’s economic research team maintain that the
economy can sustain above-trend growth without inflationary pressures given
economic slack.
Report highlights:
Axis
Bank projects above-trend, above-consensus growth of 7.5% in the world’s
fastest-growing large economy.
The
authors’ thesis rests on several drivers:
1.
Receding fiscal drag and supportive monetary policy to
drive above-trend growth of 7.5%. Structural reforms and regulatory easing to
boost growth in the medium term.
2.
Improved
financials, low cost of capital, high-capacity utilization (need for new capex)
to lift capital expenditure in FY27.
3.
Sustained
TFP gains and a rebound in capital formation support a 7% trend growth outlook.
Headline inflation of ~4% likely in
FY27, but economic slack to persist
§ Axis Bank expects FY27 headline
inflation of ~4% despite above-trend growth and a likely
rebound in food prices.
§ Policy rates have likely bottomed, but
money supply can rise further to aid monetary transmission and credit growth; supply-side
measures (more T-bills, shorter-duration bonds) can reduce the yield curve
steepness.
§ Axis Bank expects 10Y yields to drift close
to 6% in FY27.
India’s
external balance is stable, USD-INR weakness helps
§ The INR’s recent weakness has brought
the REER to competitive levels.
§
Axis
Bank expects the current account deficit to widen a notch, to 1.2% of GDP in
FY26 and 1.3% in FY27, while the surge in capital outflows seen in 2Q/3Q of
FY26 will likely abate.
Economic Outlook
2026: ‘Look!
Growth above trend but low inflation’, Click here for the full report
.
Market Outlook
2026: ‘Where
earnings lead, markets follow’, Click here for the full report .