Private sector lender Axis Bank expects India’s GDP growth to rise to 7 per cent in FY26, led by a capex cycle reboot, tailwinds from back-ended fiscal spending in FY25, cut in cash reserve ratio (CRR) and likely further macro-prudential easing which could help revive credit growth, the bank’s Chief Economist Neelkanth Mishra said today.
In the bank’s economic and market2025 report, Mishra and co-authors say that the slowdown seen in H1FY25 was driven largely by unintended fiscal and credit tightening. However, dual factors of higher fiscal spending and CRR cut could lead to easing of growth headwinds. For the current fiscal, the bank expects GDP growth at 6.6 per cent. Average CPI inflation, meanwhile, is expected to ease to 4.5 per cent in the next fiscal from 4.8 per cent in FY25.
The report said current global growth forecasts show stability, but uncertainty about US policy after January 20 clouds visibility.
“Under the new US President, who has won a mandate to course-correct or disrupt trade, taxes, regulations, immigration and energy among others, policy pronouncements after January 20 are key. Even if their contours and likely impact are uncertain,” the bank said in a statement.
“Trade tariffs may be ineffective in isolation (fiscal deficits, exchange rates and industrial policy matter too), but can indeed disrupt global trade growth. Global trade growth since 2016 has ben driven primarily by the US (imports) and China (exports) post 2016. In India, a nearly empty State-election calendar provides a window to push reforms,” it added.
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