Economists see consumption-led growth in FY27, rupee in a 90-93 range

India’s real gross domestic product (GDP) growth is expected to normalise to 6.5–7% in the fiscal year 2026-27 (FY27), with consumption emerging as the main growth driver, according to Sakshi Gupta of HDFC Bank and Kanika Pasricha of Union Bank of India. They said expectations have shifted after a weak phase, while nominal GDP growth is likely to improve, supporting earnings and credit trends.

Kanika Pasricha said the gap between real and nominal growth has been driven by a low GDP deflator. She expects nominal GDP growth to rise from about 8.5% this year to 9.5–10% in 2026-27, while real growth eases into its long-term band. “In the 6.5 to 7% range, it’s part of the long-term range for real GDP growth,” she said, adding that consumption should benefit from the lagged impact of income and Goods and Services Tax (GST) measures and past monetary easing by the Reserve Bank of India.

Sakshi Gupta projected nominal GDP growth of 10.1% in 2026-27, up from an estimated 8.3% this fiscal, with real GDP at 6.7–6.9%. “Next year as the inflation cycle turns… that will also lift nominal GDP growth,” she said, noting that consumption could broaden from rural areas to include stronger urban demand.

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On capital expenditure, Kanika said government-led spending may slow as fiscal consolidation continues, while a broad private capex cycle remains uncertain outside select areas such as artificial intelligence, data centres, semiconductors, and renewables. Sakshi offered a slightly more supportive view, citing improving capacity utilisation and demand. “I do expect private capex contribution to growth to be slightly better,” she said, while adding that government capex at ₹11–12 lakh crore would be supportive but not the main growth driver.

Both economists flagged risks from goods exports and trade negotiations. Sakshi said trade outcomes remain an overhang for 2026-27 growth estimates.

On the currency, Sakshi and Kanika expect the rupee to trade in a 90–93 range against the US dollar by 2026-27, with near-term volatility linked to trade deal timing. “For 2026-27, we are looking at a range of 90 to 92 against the dollar,” Sakshi said, citing expectations of a balance of payments surplus and a narrower current account deficit. Kanika agreed on the direction, saying the rupee could see a brief lift after a trade announcement but remain under depreciation pressure in line with fundamentals.

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Turning to monetary policy, both said the rate-cut cycle is at or near completion after 125 basis points of easing. Sakshi said another cut is unlikely if growth momentum holds. “We are pretty much at the bottom and we could see the RBI remaining on hold,” she said, adding that liquidity management will be the focus. Kanika expects one final cut to complete the cycle, with 5% seen as the terminal rate, and said durable liquidity support will be needed through 2026-27.

For the full interview, watch the accompanying video

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