GDP growth
India’s real gross domestic product (GDP) growth is expected to exceed 7% and total nominal growth to be around 10%, even though government and Reserve Bank support is now gradually tapering off. The speed at which relief was being given in government expenditure and interest rates may not be seen in future, but despite this, India’s economic condition remains stronger than many estimates. He said that we believe that even in the financial year 2025-26 (FY26), real GDP growth can be above 7% and total GDP growth can be a little more than 10%. He also said that global challenges are now reducing and tariff related deals can support growth.
According to Samiran Chakraborty, Chief Economist of Citi India, inflation may remain on average around 3.8% throughout the year, which leaves scope for further reduction in interest rates. Chakraborty said the Reserve Bank of India has room to provide some more relief, but cautioned that its timing would depend on new GDP and inflation data as well as the movement of the rupee.
Earnings outlook of companies
Talking about the difference between strong economic data and weak performance of the stock market, Chakraborty said that the reasons for growth are not fully reflected in the listed companies in the stock market. He said that now the share of services has reached 60-80% of the total consumption, while the demand in villages is better than that in cities. He also said that the companies which are not listed in the stock market are growing rapidly. For this reason, GDP figures are increasing, but its impact on the earnings of listed companies is not visible.
He said that if the total GDP growth increases to around 10%, then the total earnings of the companies should also increase and he believes that the difference is visible now. It may reduce in future. Regarding the rupee, Chakraborty said that its outlook now looks better, because India’s balance of foreign transactions can move from deficit to surplus. Citi estimates that the current account deficit will be around 0.5% of GDP and the BoP may come into surplus only in the January-March quarter.
What is the estimate on Rs.
He said that this year the difference in inflation did not show much impact, but the picture may change next year. Citi expects the rupee to remain around the level of 91, meaning the weakness seen in 2025 will not be repeated in 2026. According to Chakraborty, RBI should focus less on how many times it has to cut interest rates and more on maintaining easy financial conditions. He said that the real question is how long can RBI maintain the environment of low interest rates and for this he mentioned steps to increase liquidity like open market operations.
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