India's Nominal GDP Growth Predicted to Plummet, Impacting Corporate Revenues

A Jefferies report predicts India's nominal GDP growth to slow to 9% in FY26, potentially stalling corporate revenue and credit growth. Despite steady real GDP growth, lower inflation could hinder nominal indicators, impacting economic momentum.

India could face a significant slowdown in its nominal GDP growth in the coming fiscal year, as a report by Jefferies suggests a decrease to 9% by FY26. This projection marks the second-slowest growth rate since FY04, apart from the pandemic-affected FY21.

The anticipated slowdown is attributed to lower inflation rates, which, despite stable real GDP growth of 6.5%, are expected to suppress overall nominal growth. Jefferies warns that this softer nominal GDP could have widespread effects on key economic indicators such as corporate revenues and credit expansion.

Jefferies' analysis indicates that corporate revenue growth is unlikely to see substantial increases by FY26, with weaker nominal figures also dampening earnings momentum. Additionally, while the Reserve Bank of India is likely to maintain a pro-growth policy to aid lending, the report predicts bank credit growth will not surpass 11-12% by March 2026.