Kamal Ghorui
Ongoing turmoil in the Middle East has raised concerns about global economic growth. For India, however, the outlook appears optimistic, with SBI expecting a stable growth path through FY26 and FY27 despite a difficult global backdrop. The State Bank of India (SBI) Research report pegs real GDP growth at around 7.2% in the fourth quarter of FY26, with full-year FY26 growth projected at 7.5%. For FY27, growth is expected to moderate to 6.6%, reflecting a gradual normalisation, with quarterly estimates placed at 6.8% in Q1, 6.6% in Q2, and 6.5% in both the second half of the year. SBI Research noted that these projections may be revised as fresh data flows in and geopolitical developments evolve.Despite global challenges, the report said that India’s economic activity has remained resilient. Rural demand continues to be supported by healthy farm and non-farm activity, while urban consumption has shown a steady recovery since the festive period, backed by fiscal support measures.Meanwhile at the global level, International Monetary Fund has trimmed its 2026 growth forecast to 3.1% from 3.3%, citing supply chain disruptions linked to the Middle East conflict. Even so, India’s growth outlook has been slightly upgraded to 6.5%, supported by strong domestic demand.
Here’s what the SBI report said:
SBI Research, which monitors 50 high-frequency indicators across key sectors including consumption, agriculture, industry and services, reported that 85% of these indicators showed acceleration in Q4FY26, compared with 83% in the previous quarter. It said this aligns closely with the National Statistical Office’s advance estimate of 7.3%, while its own projection stands at 7.2% for the quarter.The report also pointed to strong credit expansion. Lending by scheduled commercial banks rose 16.1% in FY26, up from 11% in FY25, with incremental credit of Rs 29.5 lakh crore, much of it concentrated in the second half of the year. SBI Research said this momentum has been supported by government-driven consumption and healthy GST collections, while forecasting credit growth of 13-14% in FY27.However, external vulnerabilities remain a concern. The report warned that rising crude oil prices could significantly impact macroeconomic stability. It estimated that every $10 per barrel increase in oil prices could widen the current account deficit by 30-35 basis points, push inflation higher by 35-40 basis points, and reduce GDP growth by 20-25 basis points. At sustained levels of around $100 per barrel in FY27, growth could remain anchored near 6.6%.Currency movements also feature as a key risk factor. SBI Research said a depreciation of Re 1 in the rupee could lower nominal GDP in dollar terms by 20-25 basis points. It added that if the exchange rate touches Rs 95 per dollar, India’s economy could shrink to $4.04 trillion, potentially delaying the achievement of the $5 trillion target to FY30.The report called for structural steps to strengthen the balance of payments position, noting that higher crude prices and rising transport and insurance costs are adding pressure on external accounts.It also examined financing options such as a “Resurgent Indian Diaspora Bond” or similar deposit mobilisation mechanism to support external funding needs. However, it cautioned that current global yield conditions make such instruments more difficult to structure compared to earlier years. The report stressed that design elements such as size, tenure, yield and tax treatment would need careful consideration, along with backing from a credible global institution to ensure competitiveness.On technology, SBI Research highlighted artificial intelligence as a major global growth driver and urged India to focus on AI-led productivity and competitiveness gains. It estimated that AI-linked growth potential in India could range between 4% and 10%, supported by expansion in IT services, SaaS platforms and efficiency improvements across sectors.The report said, “High time for the country to rededicate towards AI led productivity gains, competitiveness and global value chain integration through carefully crafted policies.” It further added, “The AI revolution is not just another bandwagon.. India can hardly afford to miss ‘leading from the front’.”
