Chakraborty said the scale of fiscal and monetary stimulus seen earlier may not continue, but India’s growth outlook remains stronger than many estimates. “We think fiscal year 2025-26 (FY26) would still be an above 7% real GDP and marginally above 10% nominal GDP growth,” he said, adding that global headwinds are easing and a tariff deal could support growth.
On inflation, Citi expects an average of about 3.8% for the year, which leaves some room for further policy easing. “There is space for the Reserve Bank of India (RBI) to ease marginally more,” Chakraborty said, though he cautioned that the timing will depend on new GDP and inflation data series, as well as currency dynamics.
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Addressing the gap between strong macro data and weaker market performance, Chakraborty said the growth drivers are not fully reflected in listed companies. He pointed out that services now account for 60–80% of incremental consumption, while rural demand is outperforming urban demand. He also said unlisted companies are growing faster, pushing GDP numbers higher without a similar impact on listed earnings.
“If nominal GDP growth picks up to about 10%, that will pull up nominal earnings as well,” he said, adding that the current disconnect may not persist.
On the currency, Chakraborty said the outlook is improving as India is expected to move towards a balance of payments (BoP) surplus. Citi forecasts a current account deficit of about 0.5% of GDP and expects the BoP to turn surplus as early as the January–March quarter.
“This year inflation differential did not play a big role, but next year this pattern could change,” he said. Citi expects the rupee to stay broadly around the 91 level, suggesting that the underperformance seen in 2025 may not repeat in 2026.
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Chakraborty said the focus for the RBI should be less on the number of rate cuts and more on maintaining easy financial conditions. “The bigger focus should be on how long RBI can elongate this easy rate situation,” he said, pointing to liquidity measures such as open market operations.
He noted that managing policy in 2026 will be complex, given large bond supply expectations and the need to balance rate cuts with deposit growth and bond demand.
Looking ahead, Chakraborty said a return to BoP surplus will be the most important macro factor for India in 2026. “That BoP needs to turn into surplus, and that will solve a lot of our issues,” he said, adding that capital flows will be central to sustaining macro stability.
For the full interview, watch the accompanying video
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