India’s economy is projected to grow between 6.8 per cent and 7.2 per cent in the financial year 2026–27, supported by bilateral trade agreements with major economies and continued economic reforms, according to the latest Economy Watch report released by EY.
The report said India’s medium-term growth outlook has improved amid expectations that expanding trade partnerships and domestic reforms will help offset global uncertainties, including those arising from recent tariff-related developments in the United States.
EY India Chief Policy Advisor D.K. Srivastava said India’s extensive engagement through bilateral trade agreements has strengthened the country’s medium-term economic prospects.
The report noted that achieving the government’s long-term Viksit Bharat 2047 vision would require a sustained increase in the tax-to-GDP ratio, largely through improved tax compliance rather than new structural reforms, as most major tax reforms have already been undertaken.
According to the analysis, significant tax reforms were implemented in the current fiscal year, particularly in personal income tax and the Goods and Services Tax framework. These measures involved revenue foregone by the Centre with the objective of increasing household disposable income and supporting private consumption demand.
Despite concerns over a shortfall in gross tax revenues in FY26 due to these reforms, the report said the government is expected to adhere to its budgeted fiscal deficit target for the year.
Finance Minister Nirmala Sitharaman has projected a further reduction in the fiscal deficit to 4.3 per cent of GDP in 2026–27, continuing the government’s fiscal consolidation efforts.
In her Budget speech on February 1, the Finance Minister said the government had met its commitment to reduce the fiscal deficit to 4.4 per cent in 2025–26 and would lower it further in the next fiscal year while maintaining a balance between growth support and fiscal stability.
She also said the government plans net market borrowing of Rs 11.7 lakh crore in FY27 through dated securities to finance the fiscal deficit, with gross market borrowing estimated at Rs 17.2 lakh crore.
-IANS
