India’s Economy Poised For 6.5% GDP Growth In Fiscal 2026: EY
The economic research firm called for higher investment and public spending in order to sustain growth and stability.
As the new financial year kicks off on Monday, April 1, the country’s economy is projected to grow 6.5% in 2025-26, according to EY Economy Watch.
Their report emphasises the need for a well-calibrated fiscal strategy that supports human capital development while maintaining fiscal prudence to enhance long-term growth.
Growth Outlook & Investment Challenges
For the fiscal year that ended in March 2025, the report estimates real GDP growth at 6.4%. The National Statistical Office had last month revised GDP growth estimates to 7.6% for 2022-23, 9.2% for 2023-24, and 6.5% for 2024-25.
EY notes that to meet NSO’s full-year growth projection, the economy will require 7.6% expansion in the fourth quarter, implying a 9.9% rise in private consumption expenditure—a pace not seen in recent years. The report suggests ramping up investment expenditure, with government capital spending playing a critical role.
Private capital expenditure has remained weak for several quarters. Last week, the Finance Ministry urged industries to boost private investment to counter external risks, highlighting its role as a key driver for growth in 2025-26.
EY: Higher Public Spending is Key
The EY report also flags potential fiscal deficit concerns due to supplementary demand for grants but notes that a higher nominal GDP could help absorb some of these increases. It underscores the need for increased public spending on education and healthcare, estimating that education expenditure should rise to 6.5% of GDP by fiscal 2048 from the current 4.6%, while healthcare spending needs to climb from 1.1% in 2021 to 3.8%.
A phased approach to fiscal restructuring could meet these targets without compromising growth, it added, suggesting that raising the revenue-to-GDP ratio from 21% to 29% over time could provide necessary resources while ensuring fiscal discipline.
EY India’s Chief Policy Advisor, DK Srivastava, said India’s changing demographic structure, with a rising working-age population, could drive a virtuous cycle of growth, employment, savings, and investment.
To capitalise on this, India may need to gradually increase spending on health, education, and infrastructure while ensuring adequate funding for low-income states through equalisation transfers.
(With text inputs from PTI.)
