India’s economy is expected to maintain steady momentum over the next two years, with GDP growth projected at 6.5 per cent in 2026 and 6.4 per cent in 2027, keeping the country among the world’s fastest-growing major economies, according to a report released on Tuesday.
The report by DBS Bank said inflation is likely to follow a gradual normalisation path, with consumer price inflation projected to rise from 2.2 per cent in 2025 to 3.5 per cent in 2026 and 4.5 per cent in 2027.
Against this backdrop, the Reserve Bank of India is expected to maintain a stable monetary policy stance, keeping the repo rate unchanged at 5.25 per cent through 2026 and 2027. The outlook signals policy continuity amid improving domestic macroeconomic conditions and manageable price pressures.
The report added that India’s 10-year government bond yield is likely to ease from around 6.60 per cent in early 2026 to about 6.40 per cent by the end of 2027, despite volatility in global interest rate markets.
Referring to recent developments in international bond markets, DBS Bank noted that yields in several developed economies rose to multi-decade highs last week. However, it characterised the sell-off as a phase of market normalisation rather than a precursor to a broader financial crisis.
According to the bank, higher yields in most developed markets, excluding Japan, reflect a return to more typical market conditions. Strong central bank credibility and coordination between fiscal and monetary policies are expected to help maintain stability in bond markets.
On the global front, the report said the US Federal Reserve is likely to pause further policy moves at its January 27–28 meeting after three consecutive rate cuts, allowing policymakers time to assess the impact of earlier easing and potential inflationary risks.
The US economy, the report noted, continues to show resilience, with unemployment remaining low and wage growth staying positive in real terms, even as job growth shows signs of moderation.
Overall, the report said India’s strong growth fundamentals, improving inflation outlook, and stable monetary policy framework position the economy well to navigate global uncertainties in the coming years.
