Mumbai: India’s economy is expected to grow at a steady pace over the next two years, keeping it among the world’s fastest-growing major economies. According to a report by DBS Bank, India’s GDP growth is forecast at 6.5 percent in 2026 and 6.4 percent in 2027.
The report said that strong domestic demand, stable policy support, and improving global conditions should help sustain growth momentum, even as global markets remain volatile.
Inflation seen rising gradually
Inflation in India is expected to move higher but remain within manageable levels. CPI inflation is projected to rise from 2.2 percent in 2025 to 3.5 percent in 2026, and further to 4.5 percent in 2027.
This rise reflects a gradual return to normal price levels rather than sharp price pressures. The report suggests that inflation will stay within the Reserve Bank of India’s comfort range, allowing policymakers to maintain a steady approach.
RBI likely to keep rates unchanged
The Reserve Bank of India (RBI) is expected to keep the repo rate unchanged at 5.25 percent through 2026 and 2027, according to DBS Bank. This points to a stable monetary policy environment aimed at supporting growth while keeping inflation under control.
A steady policy rate could also provide comfort to borrowers and investors by reducing uncertainty around interest rate movements.
Bond yields expected to ease
India’s 10-year government bond yield is forecast to ease from around 6.60 percent in early 2026 to 6.40 percent by the end of 2027, despite volatility in global bond markets.
The report noted that global bond yields, especially in developed markets, rose sharply last week to multi-decade highs. However, DBS Bank views this move as part of market normalisation, not a sign of an impending crisis.
Global outlook and US Fed stance
The report expects the US Federal Reserve to pause interest rate action at its January 27–28 FOMC meeting, following three consecutive rate cuts. This pause would allow the Fed to assess the impact of earlier easing and watch inflation risks.
Despite slower job growth in the US, the report noted that unemployment remains low and wages continue to rise in real terms.
