India’s economic growth is expected to pick up pace and remain strong in the coming years, with GDP likely to expand at 7.5 per cent in FY27, even as inflation stays under control, according to Axis Bank’s Economic Outlook 2026 on Tuesday. 

The report, authored by Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital, says India can grow faster than its long-term trend without triggering inflationary pressures.

This is because the economy still has enough unused capacity, or slack, which allows growth to rise smoothly.

Axis Bank expects India to grow faster than most global peers and even above market expectations, making it the world’s fastest-growing large economy.

The strong outlook is supported by easing pressure from government finances, lower borrowing costs, and supportive monetary policy.

The report also highlights that ongoing structural reforms and regulatory easing will help sustain growth over the medium term.

A key driver of this growth will be a fresh rise in investment activity. With company balance sheets in better shape, the cost of capital remaining low, and factories running at high capacity, businesses are likely to increase capital expenditure in FY27.

This new investment cycle is expected to further strengthen economic momentum.

The bank’s economists also see steady gains in productivity and a revival in capital formation, which together support a long-term trend growth rate of around 7 per cent.

Even with growth moving above this trend, inflation is expected to remain well behaved.

Axis Bank forecasts headline inflation at around 4 per cent in FY27. While food prices may see some rebound, underlying price pressures remain muted.

The report notes that median inflation, which better reflects core price trends, has stayed close to 3 per cent for the past 18 months.

This suggests that demand pressures are still limited and the economy has room to grow without overheating.

On monetary policy, the report suggests that policy interest rates are likely near their lowest levels. However, money supply can still increase to improve credit flow to the economy.

The bank also expects measures on the supply side, such as higher issuance of short-term government securities, to help soften the yield curve.

As a result, the 10-year government bond yield is projected to move closer to 6 per cent in FY27.