New Delhi, Feb 26 India's economy is projected to expand between 6.8 per cent and 7.2 per cent in FY27 as bilateral trade agreements with major economies are expected, along with the government's economic reforms, to counter the global uncertainties created by the US tariff turmoil, according to the latest EY Economy Watch report.
"In the background of India's extensive bilateral trade agreements with other major economies or economic groups, India's medium-term prospects have brightened up," EY India chief policy advisor D.K. Srivastava said.
The analysis noted that achieving the government’s long-term Viksit Bharat 2047 vision would require a sustained rise in the tax-to-GDP ratio, primarily through stronger compliance rather than fresh structural overhauls, since most major tax reforms have already been implemented.
The EY Economy Watch report noted that major tax reforms were undertaken in the current fiscal, particularly relating to personal income tax and the GST framework. Both these reforms involved a considerable amount of revenue forgone aimed at increasing household disposable incomes so that private consumption demand could be supported.
These tax reforms involved considerable sacrifice of the Centre's gross tax revenues, which were expected to fall short of the budget estimates for FY26. In spite of the apprehension of this revenue shortfall, the government was widely expected to adhere to its budgeted fiscal deficit target for FY26, the report said.
Finance Minister Nirmala Sitharaman has projected a further reduction in the fiscal deficit to 4.3 per cent of GDP for 2026-27 as the government continues on the path of fiscal consolidation to ensure economic growth with stability.
In her budget speech on February 1, she said that the government had fulfilled its commitment to reduce the fiscal deficit to 4.4 per cent in the Budget for 2025-26 and would now reduce it further to 4.3 per cent as it continues on the fiscal prudence path.
She said that the target reflects a balance between supporting economic momentum and keeping public finances stable. The fiscal deficit represents the gap between the government’s total expenditure and its total revenue.
The Finance Minister said that the government would go for net borrowing of Rs 11.7 lakh crore in FY27 from dated securities to fund its fiscal deficit, while the gross market borrowing is pegged at Rs 17.2 lakh crore.
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