India's Nominal GDP Expected to Hit 10% in 2026, Boosting Equity Outlook: DBS Bank
DBS Bank's Taimur Baig forecasts India's nominal GDP growth will accelerate to 10% in calendar 2026 from 9.2% in 2025, driven by improving retail indicators and robust consumer sentiment. The economist believes the growth slowdown in the first three quarters of 2025 is behind the economy, with car sales data showing strong purchasing capacity. He expects this nominal GDP improvement to boost equity outlook and earnings growth, while viewing recent foreign investor outflows as constructive for establishing credible exit track records.
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DBS Bank economist Taimur Baig has projected a significant acceleration in India's nominal GDP growth, forecasting a jump to 10% for calendar 2026 from 9.2% in 2025. Speaking to ET Now, Baig outlined a cautiously optimistic assessment of the Indian economy, suggesting the growth slowdown witnessed in the first three quarters of 2025 is now behind the country.
Economic Recovery Indicators
Baig highlighted improving retail indicators as evidence of the economy's strengthening fundamentals, particularly pointing to car sales data that demonstrates robust consumer sentiment. "Retail sales numbers… particularly with respect to car sales, show that there is purchasing capacity, there is strong enough sentiment to propel the economy into a higher plane, let us say high sixish underpinned by robust investment and consumption trajectory for 2026 and beyond," he stated.
The economist believes the existing policy framework provides adequate support for growth acceleration, arguing against the need for aggressive policy intervention. He noted that current measures around income tax, GST, investment incentives and external conditions already establish a solid foundation for economic expansion.
Nominal GDP Growth Projections
| Parameter: | Details |
|---|---|
| Calendar 2026 Nominal GDP: | 10.00% |
| Calendar 2025 Nominal GDP: | 9.20% |
| Growth Driver: | GDP deflator turnaround |
| Expected Real Growth: | High 6% range |
Baig expects the nominal GDP improvement to be driven by a turnaround in the deflator rather than ultra-low inflation. This incremental upside is projected to strengthen the outlook for equities, earnings growth and overall nominal expansion across the economy.
Foreign Investment and Market Dynamics
Addressing concerns about foreign institutional investor outflows, Baig offered a contrarian perspective, describing the recent FII exodus as constructive for long-term market development. He argued that India's strong equity performance in 2023-24 helped establish credible exit track records, which proves crucial for private equity and venture capital investors.
"Nothing beats a track record," Baig emphasized, noting that spillover effects from earlier market strength continued supporting private capital activity even during periods of muted headline equity returns. On liquidity conditions, his assessment was unequivocal: "It is ample," indicating no constraints for business planning or capital market activity.
Currency and Global Context
Regarding rupee weakness concerns, Baig acknowledged some worry but emphasized that currency volatility remains within historical norms. He noted that compared to peers like the Indonesian rupiah, the INR's movement represents "not that big a deal" in global terms.
Baig expects the US economy to continue surprising positively in the near term, supported by strong consumer balance sheets among the top half of the population. However, he stressed the growing importance of non-US supply chains and demand across Latin America, the Middle East, Africa, Europe and Asia, with non-US trade potentially expanding close to high single digits.
Investment Outlook
Looking ahead to 2026, Baig identified valuation rather than liquidity as the decisive factor for capital flows between emerging and developed markets. Drawing parallels with China's experience, he noted how deeply depressed valuations eventually attracted capital despite geopolitical tensions.
With India having experienced lacklustre equity performance while maintaining decent earnings and growth, Baig believes valuation screens will soon start "turning green" for Indian markets. He anticipates renewed global investor interest, expecting significant discussion about India during his spring visits to the US, similar to the attention China received previously.
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