India’s GDP Growth Seen Accelerating to 7.5% by FY27: Axis Bank

India’s economic growth is expected to strengthen further over the next few years, with GDP projected to expand by 7.5 per cent in FY27, according to Axis Bank’s Economic Outlook 2026. The report, authored by Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital, highlights India’s ability to grow above its long-term trend without generating inflationary pressures.

The report attributes this optimism to the presence of adequate slack in the economy, meaning there is still unused productive capacity that allows growth to accelerate smoothly. As a result, India is expected to outperform most global peers and remain the fastest-growing large economy, exceeding current market expectations.

A supportive macroeconomic environment underpins this outlook. Easing stress on government finances, lower borrowing costs, and accommodative monetary policy are expected to create favorable conditions for sustained growth. In addition, ongoing structural reforms and regulatory simplification are likely to strengthen the medium-term growth trajectory.

A renewed investment cycle is identified as a key growth driver. Improved corporate balance sheets, relatively low cost of capital, and high capacity utilization in manufacturing are expected to encourage businesses to step up capital expenditure in FY27. This rise in investment is seen as critical to reinforcing economic momentum.

The report also points to steady improvements in productivity and a revival in capital formation, supporting a long-term trend growth rate of around 7 per cent. Even as growth exceeds this level, inflation is expected to remain contained.

Axis Bank forecasts headline inflation at about 4 per cent in FY27. While food prices may experience some rebound, core inflationary pressures remain subdued. Median inflation has hovered near 3 per cent over the past 18 months, indicating limited demand-side stress.

On the policy front, interest rates are expected to be near their cyclical lows, with scope for increased liquidity to improve credit flow. Measures such as higher issuance of short-term government securities could also flatten the yield curve, pushing the 10-year government bond yield closer to 6 per cent in FY27.