India’s economic growth for the next fiscal 2026-27 (FY27) is pegged above trend growth seen so far as the the pace of fiscal consolidation should slow further, according to Neelkanth Mishra – Chief Economist, Axis Bank and Head – Global Research, Axis Capital. The lead economist eyes India’s real GDP growth at 7.5% for FY27 and the headline inflation is likely to average at 4%, which meets the target set by the Reserve Bank of India.
According to Axis Bank, India’s fiscal and monetary headwinds are receding as the GDP growth picked up in FY26. Going further, the lagged effects of monetary easing should become visible as the headwinds to growth from fiscal and monetary tightening have abated, as per Axis Bank’s outlook.
FY27 Outlook: India’s GDP growth
In an exclusive interaction with NDTV Profit on Tuesday, Dec. 16, Mishra said that currently there has been a significant amount of slack in the economy due to labor market easing. According to Mishra, India is the only large economy in the world where the workforce is expanding and the growth is also trending around 5-7% below the pre-pandemic path.
“This is showing up in various ways as real wage growth is weak and there is low-end consumption except during stimulus periods. So, there is slack in the economy, which means we can run the economy faster than trend growth without having an immediate pressure of inflation,” he said.
In FY25, fiscal and monetary tightening happened and fiscal headwinds faded in FY26 and credit growth is yet to pick up. “In FY27, we expect that fiscal headwinds will be a lot more moderate. But, the monetary easing can provide tailwinds so the growth will be above trend. That’s why, India’s FY27 real GDP growth is pegged at 7.5%,” said Mishra to NDTV Profit.
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