India’s Growth Momentum Could Push FY27 GDP Growth to 7%

India is on track to record real GDP growth of 6.5-7 per cent in the current fiscal year, with nominal growth expected at around 11-12 per cent, supported by resilient domestic demand, stronger bank credit and improving economic activity, according to a Jefferies report.

In its latest GREED & Fear report, the brokerage said India’s economic performance has been stronger than anticipated six months ago, driven by broad-based credit expansion and improving demand indicators.

Bank credit growth accelerated to 17.8 per cent year-on-year in July. Credit to micro, small and medium enterprises (MSMEs) rose 24.9 per cent, while lending to industry increased 20 per cent and loans to the services sector grew 22.9 per cent. Corporate lending also expanded 21.6 per cent.

Jefferies said the increase in corporate lending could indicate that the long-awaited private sector capital expenditure cycle is beginning to gain momentum.

Mahesh Nandurkar, Head of India Research at Jefferies, said earnings growth is expected to increase from 14 per cent in the current fiscal year to 17 per cent in the next fiscal year beginning April 1.

The report also highlighted continued strength in domestic demand. GST collections rose 14.8 per cent year-on-year in August, while power demand growth accelerated to 9.4 per cent during April-August, compared with 1.8 per cent in January-March.

Foreign currency inflows have also remained strong following the Reserve Bank of India’s initiative that helped the government mobilise a better-than-expected $136 billion in foreign currency deposits from non-resident Indians.

On the fiscal front, Jefferies said the government’s consolidation efforts remain on track, with the fiscal deficit projected at 4.3 per cent of GDP in the current fiscal year and expected to decline further in subsequent years.