India’s Economy Set for Stable Growth; Repo Rate Likely to Remain Unchanged Until 2027

New Delhi: India is expected to maintain steady economic 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 noted that consumer price index (CPI) inflation is likely to rise gradually, from 2.2 per cent in 2025 to 3.5 per cent in 2026 and further to 4.5 per cent in 2027, reflecting a process of price normalisation.

It also indicated that the Reserve Bank of India (RBI) is expected to maintain a stable monetary policy stance, keeping the policy repo rate unchanged at 5.25 per cent throughout 2026 and 2027.

According to the report, India’s 10-year government bond yield is forecast to soften from around 6.60 per cent in early 2026 to about 6.40 per cent by the end of 2027, despite ongoing volatility in global interest rates.

Commenting on recent developments in global bond markets, DBS Bank observed that yields in developed economies climbed last week to levels not seen in decades. However, it described the sell-off as part of a broader market normalisation rather than an indicator of an impending crisis.

“The sell-off may appear unsettling, but we do not see these developments as precursors to a crisis,” the report stated.

In developed markets outside Japan, the rise in yields largely reflects normalising market conditions, the bank said, adding that strong central bank credibility and effective coordination between fiscal and monetary policies could help maintain stability in bond markets.

On the US outlook, DBS Bank expects the Federal Reserve to pause policy action at its January 27–28 FOMC meeting after three successive rate cuts. The pause, the report said, would allow the Fed to assess the impact of earlier easing measures and evaluate upside risks to inflation.

The report also noted that while job growth in the US may have moderated, the unemployment rate remains low and wage growth continues to be positive in real terms.

With inputs from IANS