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HSBC: India's Policies to Fuel Consumer Demand Revival Through FY27

A report by HSBC Asset Management states that India's accommodative fiscal and monetary policies, along with financial deregulation, are poised to support a revival in domestic consumer demand into the 2026-27 fiscal year. It notes that while growth is expected to moderate to 6.5% in 2026 from 7.3% in 2025, the economy remains resilient due to structural reforms like GST and labour changes. Inflation is projected to increase to 3.9% in 2026 but stay within a manageable range, allowing policymakers to maintain growth support. The report concludes that this prudent macroeconomic management positions India well to navigate global uncertainties.

Key Points: India's Fiscal, Monetary Policies to Boost Consumer Demand: HSBC

  • Policy mix to revive consumer demand
  • Growth to moderate but stay robust at 6.5%
  • Inflation to rise but remain in comfort zone
  • Fiscal discipline expected to continue
3 min read

India's fiscal, monetary policies to support consumer demand revival in FY27 amid global uncertainties: HSBC

HSBC report says supportive fiscal & monetary policies, plus financial deregulation, will drive India's consumer demand revival into FY27 despite global risks.

"Supportive fiscal and monetary policies and (financial) deregulation support a domestic/consumer demand revival into FY27 - HSBC Asset Management Report"

New Delhi, January 22

Supportive fiscal and monetary policies, along with financial deregulation, are expected to aid a revival in the consumer demand in India into FY27, even as the global environment remains uncertain, according to a report by HSBC Asset Management.

The report highlighted that India's macroeconomic framework continues to focus on supporting growth while maintaining stability. It noted that a combination of accommodative fiscal and monetary policies, along with ongoing deregulation in the financial sector, should help sustain domestic demand momentum over the medium term.

This policy support is seen as crucial at a time when external uncertainties continue to pose risks to global growth.

It stated "Supportive fiscal and monetary policies and (financial) deregulation support a domestic/consumer demand revival into FY27".

HSBC said recent reforms, including changes in the Goods and Services Tax (GST) framework and labour reforms, further strengthen India's structural growth story.

These reforms are expected to improve efficiency, enhance formalisation, and support productivity, thereby reinforcing the medium-term outlook for consumption and investment-led growth.

On inflation, the report stated that price pressures are likely to normalise into FY27 while remaining largely benign. However, it also pointed out that inflation is expected to rise in the near term.

As per the report data, inflation in 2026 is projected to increase to 3.9 per cent, compared to 2.1 per cent reported in 2025. Despite this increase, inflation levels are expected to remain within a comfortable range, providing space for policymakers to continue supporting growth.

The report also shared about the importance of fiscal discipline. It said fiscal pragmatism is likely to continue, suggesting that the government will balance growth support with a cautious approach to public finances.

For 2026, the fiscal impulse is expected to remain neutral, indicating no major expansionary or contractionary shift in fiscal policy.

On the growth outlook, HSBC stated that India's economy grew at 7.3 per cent in 2025. For 2026, growth is expected to moderate but remain robust at 6.5 per cent.

The report noted that this growth trajectory reflects resilience in domestic demand, supported by policy measures and structural reforms, even as global growth conditions remain challenging.

In terms of monetary policy, the report said that policy rate expectations remain stable. According to HSBC Asset Management, the 12-months-ahead policy rate outlook for India suggests that rates are expected to remain in the range of 5 to 5.25 per cent.

This stable rate environment is expected to provide predictability for businesses and consumers, supporting borrowing, spending, and investment decisions.

Overall, the HSBC report indicated that India's policy mix, backed by reforms and prudent macroeconomic management, is well positioned to support consumer demand revival into FY27 despite external uncertainties.

- ANI

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Reader Comments

P
Priya S
Good to see reports acknowledging the GST and labour reforms. As a small business owner, the formalisation has been a challenge but is paying off in the long run with better access to credit. Stable interest rates around 5% will really help with planning expansion. Fingers crossed!
R
Rohit P
Growth moderating from 7.3% to 6.5% is still fantastic given the global situation. The important thing is that the momentum is sustained. Fiscal discipline is crucial though - hope the 'neutral impulse' doesn't mean cutting back on important infrastructure spending.
S
Sarah B
Reading this from an investment perspective. A stable policy rate outlook between 5-5.25% provides much-needed predictability for the markets. This, combined with the demand revival focus, makes a strong case for staying invested in Indian equities for the medium term.
V
Vikram M
All this sounds good on paper, but will the 'demand revival' actually reach the middle and lower-middle class? Salaries aren't rising as fast as prices for essentials. Policy support must translate to more money in hand for average families, not just corporate profits.
K
Karthik V
The report mentions inflation going from 2.1% to 3.9%. That's almost double! While they call it 'comfortable', for households budgeting every rupee, even this increase matters. Hope RBI and the government keep a very close watch on food and fuel prices.

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