'India to remain fastest-growing large economy': Axis Bank projects FY27 GDP growth at 7.5%
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Axis Bank, in its Outlook 2026 research report, said India will remain the fastest-growing large economy in 2026-27, and that it could clock in 7.5% GDP growth in the next fiscal year, same as its FY26E estimate of 7.5%. “With fiscal and monetary headwinds receding, GDP growth has picked up in FY26. In FY27, the pace of fiscal consolidation should slow further (20bps), and the lagged effects of monetary easing should become visible, pushing growth to 7.5%,” Axis Bank economists write.
Economists believe headwinds to growth from mostly intended fiscal and largely unintended monetary tightening that slowed the economy in FY25 have abated, resulting in the growth revival in FY26. In FY27, Axis expects monetary easing to drive above-trend growth of 7.5%. “While regulatory easing (e.g., EoDB, revoked QCOs, new labour codes) could boost growth over the medium-term, their announcement boosts sentiment," Axis Bank economists write.
Axis projects inflation to rise to 4% in FY27, up from FY26E of 1.8%. “While labour growth and global demand remain modest, sustained TFP gains (1.5–2%) and a rebound in capital formation, led by manufacturing, utilities, and real estate, support a 7% trend growth outlook. FY27 consensus appears conservative.”
January 2026
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Axis’s estimates of FY26 are higher than the RBI’s projections, which see the GDP growth at 7.3% in the fiscal year. RBI Governor Sanjay Malhotra, in his MPC announcement, said, domestic factors such as healthy agricultural prospects, continued impact of GST rationalisation, benign inflation, healthy balance sheets of corporates and financial institutions and congenial monetary and financial conditions should continue to support economic activity. "Real GDP growth for 2025-26 is projected at 7.3 per cent, with Q3 at 7.0 per cent, and Q4 at 6.5 per cent. Real GDP growth for Q1:2026-27 is projected at 6.7 per cent and Q2 at 6.8 per cent,” the central bank said.
India's economy continued its strong momentum in Q2 FY2025-26 (July-September), with GDP growth coming in at 8.2%, beating estimates and marking one of the best quarterly performances in recent years. With this, India remains one of the fastest-growing economies in the world.
The RBI Governor said the underlying inflation pressures are even lower as the impact of the increase in the price of precious metals is about 50 bps. “For the first time since the adoption of flexible inflation targeting (FIT), average headline inflation for a quarter at 1.7% in Q2:2025-26, breached the lower tolerance threshold (2%) of the inflation target (4%). It dipped further to a mere 0.3% in October 2025.”