India’s economy is poised for steady expansion, with GDP growth projected to range between 6.8% and 7.2% in the fiscal year 2026-27, according to a comprehensive report from EY. This optimistic outlook stems from strategic bilateral trade agreements with major global economies and proactive economic reforms by the central government to mitigate potential impacts from U.S. tariffs.
DK Srivastava, Chief Policy Advisor at EY India, highlighted how these trade pacts are enhancing India’s medium-term growth prospects. ‘Engaging with key economic blocs through bilateral deals positions India favorably in the global trade landscape,’ he noted.
The report emphasizes the need for a sustained increase in the tax-to-GDP ratio to achieve the ambitious ‘Viksit Bharat 2047’ vision. This will primarily come through stronger compliance rather than new structural reforms, as most major tax overhauls have already been implemented.
Recent reforms in personal income tax and the GST framework aim to boost disposable incomes for households, thereby supporting private consumption demand. However, these changes have implications for government revenues, which may fall short of budget estimates for FY 2026.
Despite potential revenue shortfalls, the government is expected to adhere to its fiscal deficit target. Finance Minister Nirmala Sitharaman has outlined a plan to reduce the fiscal deficit to 4.3% of GDP in 2026-27, down from 4.4% in 2025-26. This reflects a balanced approach to sustaining economic momentum while ensuring public finance stability.
In her February 1 budget speech, Sitharaman reaffirmed the government’s commitment to fiscal prudence. The plan includes net borrowings of ₹11.7 lakh crore through dated securities and gross market borrowings of ₹17.2 lakh crore for FY 2027. These measures underscore India’s resolve to navigate global uncertainties with robust domestic policies.