India’s economic growth is projected to accelerate and remain robust in the coming years, with the country’s GDP expected to expand at 7.5 per cent in FY27, according to Axis Bank’s Economic Outlook 2026 released on Tuesday.
The report, prepared by Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital, notes that India has the capacity to grow faster than its long-term trend without sparking inflationary pressures.
This optimistic forecast is attributed to the presence of unused capacity, or economic slack, which allows for smooth growth without overheating the economy.
Axis Bank predicts that India will outpace most global peers and surpass market expectations, positioning itself as the fastest-growing large economy in the world.
The report highlights that easing fiscal pressures, lower borrowing costs, and supportive monetary policy will underpin this growth trajectory. Structural reforms and regulatory easing are also expected to sustain momentum over the medium term.
A major factor driving this growth is anticipated to be a fresh wave of investment activity. With corporate balance sheets in stronger condition, low cost of capital, and factories operating near full capacity, businesses are likely to boost capital expenditure in FY27. This upcoming investment cycle is projected to further strengthen economic momentum.
In addition to investment, steady gains in productivity and a revival in capital formation are expected to support a long-term trend growth rate of around 7 per cent.
Despite growth exceeding the long-term trend, inflation is likely to remain contained. Axis Bank forecasts headline inflation at roughly 4 per cent in FY27. While food prices may experience some upward pressure, overall core price trends remain muted. The report notes that median inflation has hovered around 3 per cent over the past 18 months, indicating limited demand pressures and room for sustainable expansion.
Regarding monetary policy, the report suggests that policy interest rates are near their lowest levels. Nonetheless, money supply can still be increased to enhance credit flow to the economy. Measures on the supply side, including higher issuance of short-term government securities, are expected to help flatten the yield curve. Consequently, the 10-year government bond yield is projected to approach 6 per cent in FY27.
Axis Bank’s outlook underscores the potential for India to maintain strong economic performance through a combination of robust investment, supportive policies, and controlled inflation, reinforcing its position as a global economic leader.
