Robust consumer spending and public investments are expected to sustain India’s real GDP growth at 6.7 percent in fiscal 2027 and 7 percent in fiscal 2028, according to S&P Global Ratings. The Union Budget aligns with the anticipation of gradual fiscal consolidation, positioning India favorably compared to similar income-level peers. The government is on track to meet its fiscal deficit targets for fiscal 2026 and 2027, despite lower Goods and Services Tax (GST) receipts.
The report by S&P Global Ratings indicates that India is likely to achieve its fiscal 2027 deficit target, supported by potential revenue growth from increased consumption and enhanced collection efficiency. The reduction in GST rates is expected to boost middle-class spending and complement income tax reductions, shifting the growth focus towards consumption over investment. The budget for fiscal 2027 includes measures to bolster manufacturing and exports in response to challenges in export-oriented manufacturing due to increased U.S. tariffs.
India’s government continues to prioritize investment-driven growth, with capital expenditure allocation remaining steady at 3.1 percent of GDP. When factoring in related capital spending, the total capital outlay is set to rise to 5.6 percent of GDP in fiscal 2027. The report also anticipates improved execution of infrastructure projects as supply chain pressures ease, supporting economic growth.
