New Delhi: India’s real gross domestic product is expected to grow between 6.5% and 7% in FY27, supported by strong domestic demand, faster bank credit growth and improving economic activity, according to Jefferies.
The brokerage expects India’s nominal GDP growth to remain between 11% and 12% during the current financial year.
In its latest GREED & Fear report, Jefferies said the Indian economy has performed better than anticipated six months ago. The improvement has been driven by broad-based credit expansion and stronger demand indicators.
Bank lending gathers pace
Bank credit growth accelerated to 17.8% year-on-year in July, highlighting increased demand for funds across important sections of the economy.
Loans to micro, small and medium enterprises grew 24.9%, while credit to industry increased 20%. Lending to the services sector expanded 22.9%, and corporate loans recorded growth of 21.6%.
Jefferies said the sharp rise in corporate borrowing indicates that India’s long-awaited private-sector capital expenditure cycle may finally be gaining momentum.
Mahesh Nandurkar, Head of India Research at Jefferies, expects corporate earnings growth to increase from 14% in the current fiscal year to 17% in the next financial year beginning April 1.
Domestic demand stays resilient
India’s domestic demand indicators also remained encouraging. Goods and Services Tax collections increased 14.8% year-on-year in August, reflecting healthy consumption and business activity.
Power demand grew 9.4% during the April-August period, compared with just 1.8% growth between January and March.
The report also highlighted strong foreign currency inflows under a Reserve Bank of India initiative. Foreign currency deposits mobilised from non-resident Indians reached a better-than-expected $136 billion.
Fiscal consolidation remains on track
Jefferies said the government continues to make progress on fiscal consolidation. India’s fiscal deficit is projected at 4.3% of GDP in FY27 and is expected to decline further over the coming years.
Stronger credit growth, improving corporate earnings and steady domestic consumption could support India’s economic expansion despite risks from global uncertainty and volatile commodity prices.
