New Delhi, Feb 9 (IANS) India’s real gross domestic product (GDP) is likely to expand 6.4 per cent in fiscal 2026‑27 — the fastest among G20 economies — driven by strong domestic consumption and policy measures, a new report has said.

The report from Moody’s Ratings said the country’s banking system outlook remains broadly favourable amid sufficient reserves to absorb loan losses.

The operating environment for banks will remain strong in 2026, supported by robust macroeconomic conditions and structural reforms, it said.

“The rationalisation of the goods and services tax (GST) in September 2025 and an earlier increase in personal income tax thresholds will help improve affordability for consumers and support consumption-led growth,” the global brokerage mentioned.

It expects the Reserve Bank of India (RBI) to ease policy further in 2026‑27 only if there are clear signs of a slowdown in activity, adding that inflation remaining under control would allow the central bank flexibility.

The report forecasts system-wide loan growth to reach 11.13 per cent in FY27, from 10.6 per cent in FY26 (year-to-date), adding that corporate loan quality should stay healthy, supported by stronger balance sheets and improved profitability among large firms.

“Recoveries will taper as banks have resolved stressed loans to large corporate,” the report said.

The estimates from ratings agency on FY27 growth is lower than the 6.8–7.2 per cent range projected in the Finance Ministry’s Economic Survey. According to official estimates growth for the current fiscal is expected to touch 7.4 per cent.

The ratings agency had earlier said in a report that decrease in effective GST rates, however, could enhance private consumption and support India’s economic growth.

The RBI Monetary Policy Committee (MPC), in its first policy review of 2026, kept the repo rate unchanged at 5.25 per cent.

Analysts said that RBI’s decision to keep the policy rate unchanged reflected a favourable assessment of growth and inflation dynamics.

The RBI is expected to maintain an extended pause, due to positive cyclical upswing and confidence from successful conclusion of multiple trade deals, they added.

–IANS

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