India’s GDP to Grow 6.5% in FY26, Fiscal Strategy Key: EY Report

Mangalore Today News Network

New Delhi, March 30, 2025: India’s economy is projected to grow at 6.5% in the fiscal year 2025-26, according to EY Economy Watch. The report underscores the need for a balanced fiscal strategy to boost human capital while ensuring fiscal prudence for long-term growth.

The March edition of the report estimates a 6.4% real GDP growth for FY25, rising to 6.5% in FY26. It calls for realigning fiscal policy to support India’s "Viksit Bharat" vision. Revised national accounts data from the NSO estimate GDP growth at 7.6% in FY23, 9.2% in FY24, and 6.5% in FY25.

For FY25, third-quarter GDP growth is expected at 6.2%, necessitating a 7.6% rise in Q4 to meet NSO’s annual estimate. Achieving this would require a 9.9% surge in private consumption—an unprecedented feat in recent years. Alternatively, increased investment expenditure, particularly through government capital spending, could drive growth.

The report warns that fiscal deficit targets could be impacted by additional supplementary grants, though a higher nominal GDP might absorb some of the pressure. It stresses the need for increased spending on education and healthcare to sustain long-term economic expansion.

EY suggests India’s public education spending should rise from 4.6% of GDP to 6.5% by FY2048, and healthcare expenditure should increase from 1.1% (2021) to 3.8%. Support for low-income states through equalization transfers is recommended to bridge regional disparities.

A phased fiscal restructuring, raising the revenue-to-GDP ratio from 21% to 29%, is proposed to fund these initiatives without compromising fiscal stability.