New Delhi, Nov 18 India’s economy is expected to grow 7.2 per cent in fiscal 2026, driven by rate cuts, regulatory measures, strong monsoon, government capex and surplus liquidity, a report said on Tuesday.
Some impacts from GDP deflators are expected to fade in FY27, taking real GDP growth to 6.5 per cent and nominal growth pace back towards 10 per cent, the report from Development Bank of Singapore (DBS) said.
The report said that the room for aggressive RBI rate cuts is limited amid firm growth and an inflation undershoot. However, it added that a clear case for reductions could emerge in Q4CY25 if forward risks to growth appear, with prevailing low inflation providing them with the necessary room.
"We expect support from home-grown levers, such as rate cuts, transmission of past reductions, regulatory measures, support for tariff-hit sectors, strong monsoon, low inflation, government capex spending, and surplus liquidity to offset the negative impact from global uncertainties," it said.
The central bank’s support is necessary for foreign exchange and bond markets, via open market operations and through ongoing secondary market purchases, it noted.
A US-India trade deal announcement will trigger a brief relief rally in the currency, according to the bank.
"CPI easing is being driven by favourable base effects, benign energy prices, and indirect tax cuts, even as the core inflation trend has been firm due to precious metals," said Radhika Rao, Executive Director and Senior Economist at DBS Bank
The bank forecasted the current account deficit to remain benign, close to - 0.9 per cent of GDP in FY26 and - 1 per cent in FY27.
The government will meet the FY26 fiscal deficit targets amid recent sovereign rating upgrade, fiscal health and moderation in public debt levels, the report said.
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