India's Economic Growth Expected to Exceed 7% in FY27 Driven by Investment and Exports

India's economic growth is expected to exceed seven percent in fiscal year twenty twenty-seven. Investment and export cycles will increasingly offset moderating consumption trends. Corporate capital expenditure is projected to strengthen significantly in the coming years. Elevated global commodity prices may keep interest rates higher for longer periods. The Reserve Bank of India might shift towards tightening monetary policy.

New Delhi: India's economic growth is likely to remain above 7 per cent in FY27, with the investment and export cycles expected to increasingly offset a moderation in consumption and the fading impact of domestic policy support, according to a latest report by SBI Funds Management (SBIFM) Research.

The fund management firm expects nominal GDP growth to accelerate to above 12 per cent in the coming quarters, even as sticky inflation and elevated global commodity prices could keep interest rates higher for longer.

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"In the absence of a fresh global shock, FY27 growth estimates will likely need to move above 7 per cent," SBIFM Research said, adding that a stronger growth trajectory could provide room for real rates in India to adjust higher if inflation remains sticky. The optimism follows real GDP growth of 7.8 per cent year-on-year in Q1 FY27, with investment and exports emerging as the principal drivers rather than consumption.

The report said the composition of growth is particularly encouraging, with real gross fixed capital formation and exports growing around 12 per cent each, compared with 7.1 per cent growth in consumption. Corporate capital expenditure is also expected to strengthen, with capex by BSE 500 companies projected to rise 11 per cent in FY27, following ₹10.4 trillion of capex in FY26. Power is expected to account for around 55 per cent of incremental corporate capex, followed by iron and steel and capital goods.

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"As the domestic policy impulse fades and consumption becomes less broad-based, the investment cycle and global trade cycle will have to carry a greater share of the growth burden," the report said. It therefore sees exports, manufacturing, capital goods and other business-oriented segments as relatively more attractive, while recommending greater selectivity in consumption-oriented sectors.

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However, the growth outlook comes with inflation and monetary-policy risks. SBIFM noted that Brent crude could remain elevated over the next six months as China rebuilds reserves, European gas storage remains inadequate and US crude inventories decline. Against this backdrop, the report said global rates could remain higher for longer.

For India, SBIFM expects the Reserve Bank of India could eventually shift from its current neutral stance towards tightening, with around 50 basis points of cumulative rate hikes in FY27 being plausible, although the timing and magnitude would remain data-dependent.