Axis Bank sees 7.5% GDP growth, not overly concerned about the rupee
Presenting the bank’s outlook for 2026, Neelkanth Mishra, chief economist at Axis Bank, said India would remain “among major economies, the fastest growing in the world,” aided by a shift from stabilisation to acceleration as monetary conditions ease and structural reforms begin to show results.
The forecast is higher than the broader consensus of about 6.8%, which Mishra said reflected the time lag in some analysts reviewing forecasts following new data.
On the currency, Mishra played down concerns after the rupee weakened past 91 to the dollar, calling it a “mild but not wild depreciation.” He said India’s balance of payments position remained comfortable and saw no structural vulnerabilities.
“There are no structural issues here which need to be addressed,” he said, attributing recent moves largely to speculative flows and endorsing the RBI’s approach of letting the currency find its level.
Axis Bank’s base case sees the rupee drifting to 92–94 by June 2027.Mishra said growth slowed to about 6.5% in the past year due to “significant monetary and fiscal tightening,” estimating that fiscal drag (due to reducing debt) and credit constraints (due to slower credit growth amid caution on credit-deposit ratio) together shaved around 3.3 percentage points off potential growth.
“FY27 is when the first tailwinds start to appear,” he said, adding that monetary policy is likely to move from being a drag to supporting growth.Mishra’s optimism is rooted more in structural changes than in a cyclical rebound.
He said the worst of fiscal consolidation was behind the economy.
While FY25 saw fiscal tightening of about 130 basis points, FY27 is expected to see only around 20 basis points, easing pressure on growth.He also pointed to regulatory and state-level reforms as a quiet but powerful boost to potential growth.
Citing GST changes and labour reforms, Mishra said 16 states had implemented 38 major measures, including allowing women to work night shifts.
“This is like a systemic unlock,” he said, arguing that such steps raise India’s long-term growth potential.On investment, Mishra said early signs of a revival were visible, with corporate capital expenditure, excluding telecom, growing about 15% in the first half of the current fiscal.
As borrowing costs ease, this could mark the start of what he called a “golden age for Indian entrepreneurship.”At the same time, Mishra flagged policy priorities to sustain growth.
He said 10-year government bond yields, currently near 6.6%, should “correct significantly” towards 6.1%.
He criticised the long-duration bias in government borrowing, saying it had become “too much of a good thing,” and suggested issuing more T-bills to help lower yields.On inflation, Mishra said policymakers should not rush to tighten policy, arguing that there was still significant slack in the economy.
“It’s not enough that growth rates are above trend that you start to tighten,” he said, adding that Axis Bank does not expect inflation to rise to levels that would force policy tightening through 2026.
