India's economy is projected to experience robust growth, with a GDP expansion of 7.5% expected in FY27, according to Axis Bank's Economic Outlook 2026. This positive forecast comes with the added reassurance of controlled inflation, averaging around 4%.
The report, authored by Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital, suggests that India has the potential to grow at a faster pace than its long-term trend without triggering inflationary pressures. This is attributed to the presence of unused capacity within the economy, often referred to as "slack," which allows for smoother growth. Mishra also stated that India is the only large economy where the workforce is expanding.
Axis Bank anticipates that India will outperform most of its global peers and exceed market expectations, positioning itself as the world's fastest-growing large economy. This optimistic outlook is supported by several factors, including easing pressures on government finances, reduced borrowing costs, and a supportive monetary policy. The bank's economists foresee consistent gains in productivity and a revival in capital formation, which will collectively underpin a long-term growth rate of approximately 7%.
Furthermore, ongoing structural reforms and regulatory easing are expected to play a crucial role in sustaining growth over the medium term. A key driver of this growth is expected to be a renewed surge in investment activity. With improved corporate balance sheets, low capital costs, and factories operating at high capacity, businesses are likely to increase capital expenditure in FY27, further strengthening economic momentum.
Despite growth exceeding the long-term trend, inflation is projected to remain well-behaved. Axis Bank forecasts headline inflation to be around 4% in FY27. While some upward pressure on food prices is anticipated, underlying core price trends are expected to remain muted. The report highlights that median inflation, a more accurate reflection of core price trends, has remained close to 3% for the past 18 months, indicating limited demand pressures and sufficient room for sustainable expansion.
HSBC Global Investment Research also expects India's inflation to remain low in FY27, supported by strong food production, low oil prices, and seasonal factors. According to the report, well-stocked granaries and long-lasting drivers of core disinflation are likely to keep India's inflation benign.
The Asian Development Bank (ADB) has also raised its FY26 growth forecast for India to 7.2%, citing stronger-than-expected growth in the September quarter. However, the ADB retained its FY27 growth forecast at 6.5%. The Reserve Bank of India (RBI) has also revised its growth projection to 7.3%.
