MPFASL warned sudden food or fuel price shocks could reverse inflation relief, urging careful fiscal and supply-chain management
New Delhi
India’s economy is set for a strong revival in the second half of FY26, supported by tax cuts, lower interest rates, and GST reforms, according to a report by MP Financial Advisory Services LLP (MPFASL).
The report predicts that India’s GDP growth could touch 7 per cent by FY27, aided by good monsoon rains, easing inflation, and improved household income.
The report said monetary easing is not yet fully passed on, as banks have transferred only 20–30 basis points of the 100-basis-point repo rate cut to lending rates. Still, lower borrowing costs for homes, vehicles, and consumer goods are expected to boost demand.
MPFASL warned that sudden food or fuel price shocks could reverse the inflation relief achieved so far. It also cautioned that fiscal pressure from tax concessions must be carefully managed, while trade and supply-chain issues remain global concerns.
Consumer inflation dropped sharply from 6.2 per cent in October 2024 to around 2.1 per cent by mid-2025, with food inflation turning negative during June and July. System liquidity, which had seen a deficit early in 2025, expanded to Rs 3.97 lakh crore by August, supporting credit growth and spending.
The report added that private final consumption expenditure, which forms about 61 per cent of India’s GDP, is expected to grow sharply in late FY26. With the Reserve Bank of India projecting 6.5 per cent growth for FY26, experts see potential for GDP to reach 7 per cent in FY27, powered by reforms and stronger domestic demand.