India’s growth seen at 6.6% in FY27 as consumption, capex fuel next phase: Dun & Bradstreet

In its India Economic Outlook 2026 report, the ratings and analytics firm said India remains well positioned to absorb external shocks such as geopolitical tensions and trade-related disruptions, supported by macroeconomic stability, resilient domestic demand and policy continuity.

“The year FY27 would be a year of stability, where we expect GDP growth to be roughly around 6.6%," Arun Singh, global chief economist at Dun & Bradstreet, told Mint. “This growth will be largely supported by consumption."

In the current financial year, India’s economy is expected to grow 7.4% powered by strong manufacturing and services growth, healthy household spending and strong investments in fixed assets, official data showed on Wednesday.

Singh said consumption has benefited from policy measures such as GST rationalization and income tax relief announced in last year’s Budget, which have helped improve household spending power. Festive demand and gradual rural normalization are also supporting consumption trends.

Public capital expenditure (capex) is expected to remain a key anchor. D&B estimates that effective government capital spending could approach 4% of GDP in FY27 as the government continues to prioritise investments in infrastructure, technology and healthcare.

“The government’s focus on infrastructure-led growth remains intact," Singh said, adding that public capex continues to create demand visibility for the private sector.

Private investment—long seen as a missing link in India’s growth cycle—is showing signs of revival. Singh pointed to central bank data indicating a sharp rise in private capital spending intentions this year.

“One positive development, also highlighted by the RBI (Reserve Bank of India), is the expected 21% jump in private capex," he said. “What is important is that this capital spending is not limited to routine capacity expansion. It is increasingly happening in areas that improve productivity—technology, AI and other productivity-enhancing investments."

Inflation and external buffers

India’s macroeconomic backdrop remains supportive. D&B expects inflation to average around 3.1% in 2026, allowing for calibrated monetary easing while keeping real interest rates mildly positive to preserve policy credibility.

India's retail inflation, as measured by the Consumer Price Index, stood at 0.7% in November, up from 0.25% in October. Under the flexible inflation targeting framework, the Monetary Policy Committee (MPC) targets retail inflation at 4% with a tolerance band of +/-2%.

For FY26, the six-member monetary policy committee of the RBI has lowered the retail inflation projection to 2%, from 2.6%.

External sector risks are seen as manageable, with the current account deficit projected at about 1% of GDP, supported by services exports and remittance inflows. Foreign exchange reserves are expected to cushion the economy against tariff-related headwinds and global financial volatility.

According to the report, 2026 marks a shift in which macro stability moves beyond risk management and becomes an enabler for productivity-led expansion and the selective scaling of emerging sectors.

Manufacturing shifts from volume to value

Manufacturing remains central to India’s medium-term growth ambitions, but the nature of that growth is changing. Rather than replicating labour-intensive, volume-driven models, India is increasingly focusing on value creation through technology, design and supply-chain integration.

“There is a clear shift in manufacturing from volume to value," Singh said. “This is visible across technology adoption, design capabilities, supply-chain integration, semiconductors and electronics."

Defence manufacturing, supported by indigenization and rising exports, is emerging as a strategic pillar, while semiconductors, particularly in design and advanced packaging, and electronics manufacturing under the production-linked incentive (PLI) scheme are gaining momentum.

“In summary, as we look toward 2026, it is factory digitalisation and a revival in private capex that will redefine and reimagine India’s manufacturing segment," Singh said.

Micro, small and medium enterprises are expected to play a critical role as growth multipliers, aided by GST simplification, credit guarantees and greater adoption of Industry 4.0 technologies.

AI, tourism and the blue economy

Artificial intelligence (AI) is expected to emerge as a core economic driver by 2026, with India moving from pilot projects to platform-scale adoption across manufacturing, financial services, healthcare, mobility and public administration. Investments in compute infrastructure, data governance frameworks and digital public infrastructure are supporting this transition, D&B said.

Tourism is projected to undergo a structural upgrade, driven by improved connectivity, destination development and the use of digital tools such as augmented reality and multilingual AI. Niche segments including spiritual and wellness tourism, medical travel, eco-tourism and adventure tourism are expected to grow faster as states professionalise tourism policies.

The blue economy is also gaining traction, spanning maritime trade, fisheries, coastal tourism, marine biotechnology and offshore renewables. Green port retrofits, digital maritime logistics and inland waterways are expected to improve efficiency, reduce emissions and support hinterland economies.

Concerns and reform priorities

Despite the positive outlook, Singh flagged areas that require attention. Stronger coordination between the central and state governments remains critical as growth becomes more city- and region-driven.

“Better coordination between the Centre and states is essential, especially as cities and districts emerge as growth drivers," Singh said. “Both levels of government need to work together more closely for sustained outcomes."

He also stressed the importance of timely policy execution and demand creation. “Policies matter, but so does execution on the ground," Singh said, adding that India would benefit from a serious second round of reforms to sustain momentum.

Budget focus and fiscal strategy

Looking ahead, Singh expects the Union Budget for FY27 to remain growth-oriented while maintaining fiscal discipline.

“The budget is likely to focus on growth while keeping the fiscal deficit on a downward path," he said. “Fiscal consolidation is expected to remain a single-point agenda, without compromising allocations to growth-supporting sectors."

He said the broader policy narrative is shifting from incremental austerity to strategic investment. “India is positioning growth without compromising debt sustainability," Singh said. “That balance between growth and fiscal prudence is what we expect to define the policy approach going forward."

D&B said India’s next growth phase will be systems-led, with digitised logistics, trusted data, clean energy platforms and expanding urban centres reshaping productivity across the economy. A lot of scaling up could be seen in emerging sectors such as artificial intelligence, advanced manufacturing and green hydrogen, the report said.