Will India’s Domestic Consumption Drive a 7.2% Real GDP Growth in FY27?
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Synopsis
A recent report predicts that India's economy will benefit from rising domestic consumption and credit, leading to a real GDP growth of 7.2% in FY27. The findings emphasize the importance of household credit and the resilience of emerging market equities amidst changing global dynamics.
Key Takeaways
- India's real GDP expected to grow by 7.2% in FY27.
- Domestic consumption and credit are the primary growth drivers.
- Household credit is anticipated to outpace corporate credit.
- Sectors such as power and renewables are projected to excel.
- Inflation forecasted at around 4%.
New Delhi, Jan 6 (NationPress) A recent report indicates that India’s economy will experience a significant boost from domestic consumption and credit in FY27, with real GDP projected to increase by approximately 7.2 percent and nominal GDP expected to rise by 11 percent.
The analysis from SBI Mutual Fund highlights that bank credit growth is anticipated to be around 13-14 percent in FY27. Notably, bank credit surged from 9 percent in May to 11.4 percent by November 2025, suggesting an aggregate credit growth of about 10.5-11 percent in FY26.
The mutual fund firm emphasized that household credit is likely to outstrip corporate credit, suggesting that sectors driven by credit demand and premiumisation trends are poised for strong performance in the short term.
For FY26, the reported real GDP growth was around 7.5 percent, with exports identified as the weakest link, despite a stable inflation environment.
In the equities market, the fund anticipates that trends from 2025 will persist into 2026.
According to the report, emerging market equities and tangible assets, including industrial commodities, are expected to receive support following years of underperformance, fueled by recovering global growth.
With Indian markets adjusting on valuation premiums in comparison to emerging markets, they are likely to attract a fair share of investments, as per the forecast.
Policy support is expected to bolster growth, which may further elevate equity performance, despite increasing equity supply caps.
The sectors favored by the firm include power, gas transmission, capital goods, cement, and renewable energy.
The Consumer Price Index (CPI) inflation is predicted to hover around 4 percent in FY27, with the Reserve Bank of India likely to maintain a prolonged pause in monetary policy. Additionally, government bond supply is projected to surge to Rs 29 trillion, while the depreciation of the Rupee is expected to slow to approximately 2 percent, reaching Rs 92 per US dollar in FY27.
The mutual fund noted that global growth has remained resilient despite tariff impositions, supported by expansive fiscal policies and AI-driven capital expenditures in the US.
Furthermore, Europe has shifted towards fiscal expansion, while China continues to rely heavily on exports as central banks approach the conclusion of their easing cycles.
Point of View
It's essential to recognize the pivotal role that domestic consumption and credit play in India's economic growth trajectory. With the forecasted 7.2% rise in real GDP for FY27, this report highlights a promising outlook. However, addressing the weakest links, such as exports, remains critical for sustained growth.
NationPress
07/01/2026
Frequently Asked Questions
What is the projected GDP growth for India in FY27?
India's real GDP is projected to grow by approximately 7.2% in FY27.
What factors are driving this growth?
The growth is primarily driven by domestic consumption and credit.
What is the expected inflation rate for FY27?
The Consumer Price Index (CPI) inflation is forecasted to be around 4% in FY27.
What sectors are expected to perform well?
Sectors such as power, gas transmission, capital goods, cement, and renewables are favored for strong performance.
How is global growth impacting India?
Global growth has been resilient, supporting India's economic outlook despite challenges like tariffs.
