Archive · 23 Sep 2026
India’s FY27 Growth Seen Moderating Amid Inflation and Liquidity Risks
DBS Bank expects India’s economy to grow by an average of 7.3% in FY27.
The economy grew 7.8% in the first quarter compared with the same period a year earlier.
People’s spending, government investment and factory activity helped support this growth.
However, growth could slow later in the year because borrowing conditions may become tighter and energy may cost more.
Inflation rose to 4.8% in August.
Weak rainfall and higher El Niño risks could hurt crops and push prices higher.
Large foreign-currency inflows increased India’s reserves but also left banks with extra money.
The Reserve Bank of India is using special tools to manage this extra liquidity while keeping inflation under control.
DBS Bank forecasts India’s FY27 growth to average 7.3%, down from revised FY26 growth of 7.8%.
Q1 FY27 growth reached 7.8% year-on-year, supported by domestic demand, consumption, public capital spending and manufacturing.
Growth may moderate in the second half as financial conditions tighten, energy prices remain elevated and base effects weigh on activity.
August consumer inflation rose to 4.8%, while weaker monsoon rainfall and rising El Niño risks could keep inflation above 5% in H2 FY27.
Foreign-currency inflows pushed reserves above $780 billion but increased surplus liquidity, requiring RBI measures such as VRRR and open-market operations.
- Who
- Radhika Rao, Senior Economist and Executive Director at DBS Bank, provided the outlook; the Reserve Bank of India is managing inflation and banking-system liquidity.
- What
- DBS Bank forecasts average FY27 growth of 7.3% while warning of inflation, energy-price and liquidity risks.
- When
- The outlook was reported on Tuesday and covers fiscal year FY27, from April 2026 to March 2027; Q1 FY27 growth was 7.8% year-on-year.
- Where
- India; the report was datelined New Delhi.
- Why
- Growth is expected to moderate because of tighter financial conditions, elevated energy prices and base effects, while inflation and foreign-currency inflows create policy challenges.
- FY27 growth forecast
- 7.3% average growth, according to DBS Bank
- Q1 FY27 growth
- 7.8% year-on-year
- Revised FY26 growth
- 7.8%
- August inflation
- 4.8%
- Expected H2 FY27 inflation
- Above 5%
- Foreign-exchange reserves
- Above $780 billion
- RBI special-swap inflows
- $143 billion, including $133 billion through FCNR(B) deposits
- FY27 current-account deficit
- Around 1.1% of GDP
