What is India’s GDP growth forecast for FY26?
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Synopsis
India's economy is set for a remarkable 7.2 percent growth in FY26, bolstered by strategic rate cuts and public investment. Explore how these factors, along with favorable monsoon conditions and government initiatives, will shape the fiscal landscape in the coming years as reported by the Development Bank of Singapore.
Key Takeaways
- India's GDP projected to grow 7.2 percent in FY26.
- Key drivers include rate cuts and government spending.
- Anticipated 6.5 percent growth in FY27.
- Inflation trends and global uncertainties may influence economic strategies.
- Current account deficit expected to remain at -0.9 percent of GDP in FY26.
New Delhi, Nov 18 (NationPress) India's economy is projected to expand by 7.2 percent in the fiscal year 2026, fueled by rate reductions, regulatory initiatives, favorable monsoon conditions, government capital expenditures, and an abundance of liquidity, according to a recent report.
It is anticipated that the effects of GDP deflators will diminish in FY27, leading to a real GDP growth of 6.5 percent and a nominal growth rate approaching 10 percent, as outlined in the analysis from the Development Bank of Singapore (DBS).
The report highlighted that while there is limited scope for substantial RBI rate cuts due to steady growth and low inflation, a case for reductions could arise in Q4CY25 if there are emerging risks to growth, with current low inflation offering them the necessary flexibility.
"We foresee support from domestic factors, including rate cuts, the impact of previous reductions, regulatory measures, assistance for tariff-affected sectors, a robust monsoon, low inflation, investments in government projects, and abundant liquidity to mitigate the adverse effects of global uncertainties," the report stated.
It emphasized the vital role of the central bank in supporting the foreign exchange and bond markets through open market operations and ongoing secondary market purchases.
A trade agreement between the US and India is expected to prompt a brief surge in the currency values, according to the bank's analysis.
According to Radhika Rao, Executive Director and Senior Economist at DBS Bank, "The easing of the CPI is primarily driven by favorable base effects, stable energy prices, and indirect tax reductions, despite a firm core inflation trend influenced by precious metals."
The bank also projected the current account deficit to remain manageable, estimated at -0.9 percent of GDP in FY26 and -1 percent in FY27.
The government is expected to achieve its fiscal deficit targets for FY26, buoyed by a recent upgrade in sovereign ratings, improved fiscal health, and a decrease in public debt levels, the report indicated.
Point of View
I emphasize the importance of understanding the economic indicators that drive India’s growth. The projected 7.2 percent GDP growth reflects not only the resilience of our domestic economy but also the strategic measures taken by the government and the RBI. This outlook is crucial for policymakers and stakeholders to navigate future challenges and opportunities effectively.
NationPress
18/11/2025
Frequently Asked Questions
What factors are driving India's expected GDP growth?
India's projected GDP growth is driven by rate cuts, government capital expenditure, strong monsoon rains, and favorable liquidity conditions.
What will be the GDP growth in FY27?
The real GDP growth for FY27 is expected to be 6.5 percent, with nominal growth approaching 10 percent.
How will the RBI's rate cuts impact the economy?
While the scope for aggressive RBI rate cuts is limited, they may consider further reductions if growth risks emerge and inflation remains low.
