Indian Economy: EY Projects 7.2% Growth Rate by FY2027, Cites Reforms

2% in the financial year 2027. This projection is based on the country's medium-term growth prospects, identifying recent policy reforms and global trade relations as primary drivers. According to officials, this economic momentum is expected to not only boost industrial output but also increase market liquidity and employment opportunities.

The report emphasizes that the Indian economy is currently in a strong position, with both domestic demand and government investment propelling growth. The financial advisory firm believes that if the pace of reforms is maintained, India will succeed in further strengthening its position in the global economic landscape.

Expansion of International Trade Networks

According to DK Srivastava, Chief Policy Advisor at EY India, the bilateral and multilateral trade agreements entered into by India in recent years have opened new avenues for the economy. Through these agreements, the global reach of Indian products has expanded, and an improvement in the flow of foreign investment has been observed. The report notes that the growing trade network with major economic blocs has Notably brightened India's growth prospects.

The expansion of these trade relations has not only strengthened the export sector but has also brought positive changes to technology transfer and the manufacturing sector, while officials believe that India's increasing activity on the international stage has established the country as a reliable global supply chain partner.

Tax Reforms and Household Consumption

Changes made to the personal income tax and Goods and Services Tax (GST) structures during the current financial year are likely to have a direct impact on the purchasing power of the general public. According to the report, the primary objective of these reforms is to increase the disposable income of middle and low-income households. When consumers have more cash available, they drive demand in the market, which ultimately contributes to GDP growth.

However, some pressure on government revenue may be observed due to these tax concessions. The report indicates that achieving the gross tax revenue targets set for FY2026 could be a challenge. Despite this, the increase in domestic consumption is being viewed as a positive signal for the economy.

Fiscal Deficit Management and Revenue Targets

Despite a potential shortfall in tax collection, the report expresses confidence that the government will be able to meet its fiscal deficit targets. According to officials, the government has taken several steps to control expenditure and enhance non-tax revenue sources. According to the budget estimates for FY2026, the government's commitment to reducing the fiscal deficit is clearly visible.

Economic analysts believe that revenue shortfalls can be largely offset by tightening tax compliance and utilizing digital infrastructure. The report also states that the focus will now shift toward making the existing system more efficient rather than implementing major structural tax reforms.

Vision for Viksit Bharat 2047

The Government of India has set a goal to make the country a developed nation by the year 2047. According to the EY report, it will be mandatory to continuously improve the tax-to-GDP ratio to achieve this goal. Currently, this ratio is lower compared to other developed economies, and the government will need to work on long-term policies to increase it.

The report suggests that to realize the vision of Viksit Bharat, investment in infrastructure, reforms in the education and health sectors, and increasing the share of the manufacturing sector are essential, while investment in these areas won't only keep the growth rate stable but also ensure inclusive development.

Medium-Term Economic Resilience and Growth

Several key factors are contributing to the stability of the Indian economy in the medium term. These include the strength of the banking sector, improvements in corporate balance sheets, and control over inflation. According to the report, coordination between the Reserve Bank of India's monetary policies and the government's fiscal policies has created a stable economic environment.

Also, the expansion of the digital economy and the growth of the startup ecosystem have created new engines of growth. Officials believe that the combined effect of these factors will ensure that India remains one of the fastest-growing major economies in the world in the coming years.