NEW DELHI, India — India’s real gross domestic product is projected to grow 6.4 percent in fiscal year 2026–27, making it the fastest-growing economy among the G20, according to a new report that points to strong domestic consumption and supportive policy measures as key drivers.
The report said India’s banking system outlook remains broadly favorable, supported by adequate capital buffers and reserves that can absorb potential loan losses. It added that the operating environment for banks is expected to remain strong in 2026, backed by solid macroeconomic conditions and ongoing structural reforms.
According to the report, recent policy changes are likely to support consumption-led growth. “The rationalisation of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth,” the report said.
The analysis noted that the central bank is likely to ease monetary policy further in 2026–27 only if there are clear signs of an economic slowdown. It added that inflation remaining under control would give policymakers greater flexibility in managing interest rates.
System-wide loan growth is forecast to reach 11.13 percent in FY27, up from an estimated 10.6 percent in FY26 on a year-to-date basis. Corporate loan quality is expected to remain healthy, supported by stronger balance sheets and improved profitability among large companies. However, the report said recoveries are likely to moderate as banks have already resolved many stressed loans to large corporate borrowers.
The FY27 growth projection is lower than the 6.8 to 7.2 percent range outlined in the Finance Ministry’s Economic Survey. Official estimates place growth for the current fiscal year at around 7.4 percent.
The report also noted that a reduction in effective GST rates could further boost private consumption and support economic expansion. In its first policy review of 2026, the central bank’s Monetary Policy Committee kept the benchmark repo rate unchanged at 5.25 percent.
Analysts said the decision to hold rates steady reflects confidence in current growth and inflation trends. They added that the central bank is expected to maintain a prolonged pause on rate changes, supported by a positive economic cycle and increased confidence following the successful conclusion of multiple trade agreements. (Source: IANS)
