Why is BofA more bullish on India for FY26–FY27? Rahul Bajoria answers

India’s economic growth outlook is turning more optimistic, with GDP growth expected to outperform earlier estimates in FY26 and remain resilient into FY27, driven by strong post-GST cut data, supportive monetary policy and a recovery in consumption, according to Rahul Bajoria, Head of India and ASEAN Economics at BofA Global Research.

Speaking to ET Now, Bajoria said BofA has raised its FY26 GDP growth forecast and upgraded its FY27 projection to 6.8% from an earlier estimate of 6.5%, citing broad-based improvements across key macro indicators.

Strong post-GST data, policy easing drive confidence

Bajoria said the upgrade reflects sustained momentum seen across multiple high-frequency indicators following GST cuts. “Car sales, credit growth, fuel consumption and mobility indicators have all shown sequential improvement and are stronger than last year,” he said.


Policy support has also played a crucial role. The Reserve Bank of India’s rate-cut cycle, liquidity infusions and a supportive fiscal stance have collectively created a conducive growth environment. However, Bajoria cautioned that growth in FY26 may still moderate slightly compared to the current fiscal year as the impact of tax cuts fades and trade-related headwinds emerge.

Consumption continues to lead growth in 2026

BofA expects consumption to remain the primary driver of economic expansion, continuing its outperformance over investment growth into 2026. Bajoria noted that a recovery in nominal GDP growth will support urban incomes and help sustain discretionary spending.

“Government capital expenditure has also made a strong comeback after a relatively soft phase. Even if private capex stays sluggish, public capex execution will continue to support construction activity, steel demand and land use,” he said.

Discretionary demand, autos and travel stand out

On demand trends, Bajoria highlighted that discretionary consumption has benefited the most from income tax cuts, GST reductions and monetary easing. “Housing, automobiles and travel have seen strong demand, supported by low inflation and improved affordability,” he said.

Within consumption, Bajoria said automobiles remain a preferred segment, supported by affordability gains and upgrade cycles. Travel and experiential spending are also expected to perform well, particularly driven by Gen-Z consumers.

RBI has room for one more rate cut

On monetary policy, Bajoria said inflation remains benign, giving the RBI space for another 25 basis point rate cut. “We expect one more cut in the February policy meeting, after which the RBI is likely to pause and assess incoming data,” he said.


He added that any rise in inflation during 2026 is likely to be a normalisation rather than a structural inflationary surge, with global commodity prices remaining supportive.

Geopolitical risks manageable, oil prices supportive

Despite ongoing geopolitical uncertainty, including trade tensions and developments in Venezuela, Bajoria said India remains relatively well positioned. Lower crude oil prices—down nearly $15 per barrel on average over the past year—have helped cushion external shocks.

“As a house, we do not expect oil prices to move meaningfully above $60 a barrel. India’s policy reforms and economic resilience should help mitigate global volatility,” he said.

Outlook: Resilient growth amid uncertainty

Summing up, Bajoria said India is entering FY26 with improving growth fundamentals, supported by consumption, public capex and accommodative policy, even as external uncertainties persist. “It will remain a period of heightened uncertainty, but India continues to demonstrate strong macro resilience,” he added.