India’s Economy Maintains Strong Momentum, GDP Growth Could Reach 7% in FY27: Report

New Delhi: According to Jefferies, India's real gross domestic product (GDP) is projected to grow between 6.5% and 7% in the fiscal year 2027 (FY27), driven by strong domestic demand, rising bank credit, and improving economic activity. The brokerage expects nominal GDP growth to range between 11% and 12% during the current financial year.

In its latest GREED & Fear report, Jefferies noted that the Indian economy has outperformed expectations compared to six months ago, largely due to broad-based credit expansion and robust demand indicators.

Bank credit growth accelerated to 17.8% year-on-year in July, with loans to micro, small, and medium enterprises increasing by 24.9%, credit to industry rising by 20%, lending to the services sector expanding by 22.9%, and corporate loans growing by 21.6%. This sharp rise in corporate borrowing suggests that India's long-awaited private-sector capital expenditure cycle may be gaining momentum.

Jefferies' Head of India Research, Mahesh Nandurkar, anticipates corporate earnings growth to rise from 14% in the current fiscal year to 17% in the next financial year starting April 1.

India's domestic demand indicators also remain encouraging. Goods and Services Tax collections increased by 14.8% year-on-year in August, indicating healthy consumption and business activity. Power demand grew by 9.4% during the April-August period, compared to a mere 1.8% growth between January and March. Additionally, foreign currency inflows have been strong, with Reserve Bank of India's initiative mobilizing $136 billion in foreign currency deposits from non-resident Indians.

Jefferies highlighted that fiscal consolidation is on track, with India's fiscal deficit projected at 4.3% of GDP in FY27 and expected to further decline in the coming years. Despite potential risks from global uncertainty and volatile commodity prices, stronger credit growth, improving corporate earnings, and steady domestic consumption could support India's economic expansion.