According to ICICI Bank, a large base effect would probably cause India's economic growth to slow in the second half of FY27. However, growth may pick up speed in FY28, reaching about 7.2%.
In keeping with market expectations, the Monetary Policy Committee (MPC) unanimously maintained its neutral policy stance by keeping the repo rate at 5.25%. Furthermore, the private lender observed that expectations for the second half of FY27 remain mostly intact, despite the central bank's GDP and inflation projections seeing just slight modifications of 0.1 percentage points.

The RBI would be interested in seeing how actual growth results turn out in the upcoming months because the lender anticipates that growth in the domestic economy will be lower in H2 than in H1 on a high base. Despite worries that India's economy would be negatively impacted by global macroeconomic instability, the impact has been minimal, according to the majority of high-frequency indicators, which show strong growth in the first quarter and continuing pace in the second. With the exception of the PMI, the majority of important data point to an increasing growth trajectory for the economy.Growth in the domestic economy is predicted to be lower in H2 than in H1 on a high base, so the RBI will be interested to observe how actual growth results turn out in the upcoming months.

Despite worries that India's economy would be negatively impacted by global macroeconomic turbulence, it was highlighted that most high-frequency indicators showed strong growth in the first quarter and retained momentum in the second. The majority of important data point to an increasing growth trajectory for the economy, with the exception of the PMI.On a high base, growth in the domestic economy is predicted to be lower in H2 than in H1, thus the RBI would be interested to watch how actual growth results turn out in the upcoming months. We anticipate FY27 growth at 6.9%, with growth settling closer to 7.2% in FY28, given the much better high frequency indicators," it stated.

Regarding the policy outcome, the report stated that because of El Nino and global uncertainty, the RBI has far more visibility in the short term than in the medium term. In contrast to its previous policy review, when growth risks were skewed to the downside and inflation risks to the upside, the RBI now views risks to both growth and inflation as equally balanced.
With a recovery in underlying demand, the apex bank's forecast of 7.3% growth for the first quarter of FY27 points to an improving economic trajectory for FY28.The forecasts indicate that if growth continues to be robust during the second half of FY27 and continues into the following fiscal year, there may be a justification for policy rate hikes, especially if core inflation stays above the RBI's goal. Core inflation (excluding gold) is also firming.Rate increases, however, might occur later if oil prices decline. This leads us to conclude that the 50bps rate hike cycle will either begin in December 2026 (high oil prices) or April 2027 (low oil prices). It stated, "Base case is later rather than sooner.
According to the analysis, the Reserve Bank of India (RBI) is unlikely to implement long-term liquidity absorption measures after the FCNR deposit-related liquidity infusion, hence India's GDP outlook is anticipated to stay favorable.The private lender pointed out that growth-supportive liquidity conditions could result in a cumulative 50 basis point increase in policy rates.