India’s Economic Growth Holds Firm, But Inflation, Credit Gap Pose Risks: SBICAPS

New Delhi, Jun 17 (KNN) India's economy has emerged as a relative bright spot in an increasingly troubled global landscape, but mounting pressures from the West Asia conflict, rising inflation and a widening credit-deposit gap in banks are emerging as key risks, according to SBI Capital Markets (SBICAPS) June 2026 EcoCapsule report.

Strong FY26, Cautious FY27

The report titled ‘Wish Of The Indian Economy - Fewer Dark Clouds And More Rainfall’ noted that India recorded real GDP growth of 7.7 per cent in FY26, with Q4FY26 posting an impressive 7.8 per cent, driven largely by services, which grew 9.9 per cent. 

The World Bank, by contrast, has cut its global growth forecast to 2.5 per cent for CY26 — the slowest since the COVID-19 era — with the Middle East, Bangladesh and Turkey among the worst-hit. 

India received an upward revision to its FY27 growth forecast, though SBICAPS cautions that global trade headwinds and a likely below-normal monsoon could moderate growth in the year ahead.

Inflation and Energy Pressure

Wholesale prices rose to their highest level since October 2022, driven by a 24.7 per cent surge in fuel and power costs. Consumer inflation has so far remained relatively contained, but multiple fuel price hikes by state-run oil marketing companies in May are expected to feed into retail prices in coming months.

RBI Holds Rates, Deploys Other Tools

The Monetary Policy Committee (MPC) unanimously held interest rates steady, opting instead for non-policy measures to defend the rupee and attract foreign capital — including removing capital gains tax on Foreign Portfolio Investor (FPI) investments in government bonds, expanding the Fully Accessible Route for G-Secs and subsidising hedging costs on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. 

The RBI's shift in language from "sufficient" to "appropriate" liquidity signals a gradual tightening bias, though SBICAPS does not consider a rate hike in FY27 a certainty.

Banking and Markets

Bank credit growth hit a two-year high of around 17 per cent year-on-year, but deposit growth lags by over 500 basis points, leaving an estimated shortfall of nearly Rs 10 lakh crore. The FCNR(B) measures are expected to partially address this gap. 

Mutual funds saw net outflows of Rs 64,020 crore in May, driven by heavy debt fund redemptions, while gold Exchange Traded Funds (ETFs) recorded their first net outflow in 14 months.

(KNN Bureau)