India’s economy is forecasted to expand between 6.8% and 7.2% in the fiscal year 2026-27, driven by upcoming bilateral trade agreements with major economies and the government’s economic reforms. The EY Economy Watch report highlighted the positive impact of India’s trade agreements on its medium-term prospects. D.K. Srivastava, EY India’s chief policy advisor, emphasized the importance of these agreements in brightening India’s economic outlook.
The report also emphasized the need for a sustained increase in India’s tax-to-GDP ratio to achieve the government’s long-term Viksit Bharat 2047 vision. This growth is expected to come primarily from improved tax compliance rather than major structural changes, as significant tax reforms have already been implemented. The current fiscal year witnessed key tax reforms, particularly in personal income tax and the GST framework, aimed at boosting household disposable incomes to drive private consumption demand.
Despite the revenue forgone due to these tax reforms, the report suggested that the government is likely to meet its budgeted fiscal deficit target for the fiscal year 2025-26. Finance Minister Nirmala Sitharaman has outlined plans for further fiscal consolidation, aiming to reduce the fiscal deficit to 4.3% of GDP for the fiscal year 2026-27. This reduction aligns with the government’s commitment to balancing economic growth and fiscal stability.
Sitharaman, in her budget speech, announced a target of Rs 11.7 lakh crore in net borrowing from dated securities to fund the fiscal deficit in FY27, with gross market borrowing set at Rs 17.2 lakh crore. The government’s fiscal strategy aims to support economic momentum while ensuring stable public finances.
