India, starting from a position of strength in the global geopolitical landscape, is expected to achieve a growth rate of 6.8% in the fiscal year 2027, as per an SBI Research report. Despite various global uncertainties and regional conflicts, the country is displaying resilience, with its GDP likely to expand between 6.8% and 7.1%.
The report forecasts a gross fiscal deficit of Rs 16.95 lakh crore, equivalent to 4.5% of the GDP for FY27 based on the 2022-23 figures. It anticipates an increase in subsidies by Rs 60,000 crore and a potential revenue loss of Rs 1.1 lakh crore due to excise duty reductions, resulting in an additional fiscal burden of Rs 1.7 lakh crore and a possible rise in the gross fiscal deficit to Rs 18.7 lakh crore.
Looking ahead to FY27, the report suggests that the Consumer Price Index (CPI) may indicate inflation exceeding 4.5% in the second and third quarters. However, the projections for the fiscal year remain within the target range set by the Reserve Bank of India (RBI).
In the same fiscal year, the report expects the 10-Year Government Securities (G-sec) yield to range between 6.75% and 7.0%, with a downward bias if the post-conflict calm persists. This outlook is influenced by factors such as a higher gross borrowing plan, ongoing geopolitical risks, and inflation worries linked to fluctuating oil prices.
The report also highlights the potential for India to emerge as a transit hub for international tourists amidst disruptions in the Middle East. As air travel safety concerns grow in certain Middle Eastern regions and the UAE, airports in China and India could see increased global aviation traffic due to the disruption of traditional routes through the Middle East, presenting an opportunity for alternative transit hubs. However, capital investments in airport infrastructure, connectivity, and passenger services may be necessary to capitalize on this potential.
