India is set to remain the world’s fastest-growing large economy, with GDP growth projected at 7.5 per cent in FY27, as easing fiscal and monetary pressures lift economic momentum, Axis Bank said.
In its Outlook 2026 research report, Axis Bank said growth in FY27 would match its estimate for FY26 at 7.5 per cent, driven by a recovery from the tightening cycle that weighed on activity in FY25. The bank said the impact of earlier monetary easing would become more visible next year, while the pace of fiscal consolidation is expected to slow.
“With fiscal and monetary headwinds receding, GDP growth has picked up in FY26,” Axis Bank economists wrote. “In FY27, the pace of fiscal consolidation should slow further and the lagged effects of monetary easing should become visible, pushing growth to 7.5%.”
Economists at the bank said the drag from both planned fiscal tightening and unintended monetary tightening that slowed the economy in FY25 had largely faded, setting the stage for a growth revival in FY26. They added that FY27 could see above-trend growth as easier financial conditions filter through to consumption and investment.
Axis Bank expects inflation to rise to around 4 per cent in FY27, up from its FY26 estimate of 1.8 per cent, though it said underlying growth drivers remain intact. The report highlighted sustained total factor productivity gains of 1.5 to 2 per cent and a rebound in capital formation, led by manufacturing, utilities and real estate, as key supports for medium-term growth.
“While labour growth and global demand remain modest, sustained productivity gains and a recovery in investment support a 7% trend growth outlook,” the economists wrote, adding that current consensus forecasts for FY27 appear conservative.
The projections are marginally more optimistic than those of the Reserve Bank of India. The RBI has forecast GDP growth of 7.3 per cent for FY26. In its latest monetary policy statement, RBI Governor Sanjay Malhotra said domestic factors such as healthy agricultural prospects, benign inflation, improved corporate and bank balance sheets, and supportive financial conditions should continue to underpin economic activity.
The central bank has projected real GDP growth of 7.0 per cent in the third quarter of FY26 and 6.5 per cent in the fourth quarter, with growth expected to moderate to 6.7 per cent in the first quarter of FY27 and 6.8 per cent in the second.
India’s economy has already shown strong momentum. GDP growth came in at 8.2 per cent in the second quarter of FY26, beating estimates and marking one of the strongest quarterly performances in recent years.
Axis Bank said regulatory easing measures, including steps to improve ease of doing business and labour market reforms, could further lift sentiment and support growth over the medium term. As monetary conditions loosen and investment activity gathers pace, economists expect India to retain its position as the fastest-growing major economy into FY27.