DBS chief economist sees 10% nominal GDP growth for India in 2026, advises looking beyond US markets

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Despite a listless year for Indian benchmark indices in 2025, the underlying capital market dynamics have been strong, setting the stage for robust earnings growth in 2026, according to Taimur Baig, Managing Director and Chief Economist, DBS Group Research. Speaking with CNBC TV18, Baig pushed back against the notion that 2025 was a lacklustre year, arguing that a longer-term view reveals healthy capital market activity.

Baig noted that venture capitalists and private equity managers saw the boom of 2022-2024 spill over into strong per-deal revenue in 2025. "This paved the way for a very strong capital market dynamic in 2025 which might even provide a foundation for strong earnings growth in 2026," he stated. He projects a pickup in nominal Gross Domestic Product (GDP) growth to 10% in the calendar year 2026, up from an estimated 9.2% in 2025.

This, he believes, could translate into double-digit corporate earnings growth in fiscal year 2027 He added that corporate earnings prospects would vary widely by sector, and stronger nominal GDP growth would support financials in particular. Baig added that a rise in nominal interest rates would be beneficial for banks, improving their Net Interest Margins (NIMs), and that strong borrower sentiment would drive credit growth irrespective of the rate environment.

Baig identified uncertainty surrounding the US as the 'gorilla in the room' for India. He repeatedly stressed that the US is the biggest source of uncertainty, and that diversifying towards East Asia, Europe and the Middle East will be vital.

He pointed out that it has been a challenging year for exporters, such as those in the gems and jewellery sector, due to the tariff situation. For Baig, the critical lesson from 2025 is the imperative for Indian industry to diversify away from its traditional reliance on the US market. "We cannot put all our eggs in the US basket," he warned, highlighting the Middle East, Europe, and East Asia as crucial alternative markets for both exports and deal-making.

Addressing concerns over foreign private equity players exiting Indian investments, Baig viewed this trend as a positive signal rather than a cause for alarm. "The exits are a very good sign because that tells you that if you do put patient capital in India, that patience is rewarded and you get decent returns," he explained. He sees it as proof of a deepening capital market with sufficient local demand to absorb such sales, dismissing any negative fallout as a "short-term temporary blip."

As a non-consensus forecast, Baig predicted a greater global recognition of new technology originating from China. He debunked the stereotype of China being merely a technology copier, citing significant breakthroughs in areas like drug discovery, gene therapy, and protein folding that are leading Western pharmaceutical giants to seek joint ventures with Chinese firms. Baig suggested that as US-China relations remain fraught, China may become a more accommodating partner for India, offering technology transfers and favourable joint ownership terms, particularly in sectors like electric vehicles (EVs). This strategic shift, coupled with Indian corporates actively seeking opportunities in East Asia, could be a key driver for India in the coming year.