India’s Economy Poised For 6.5% GDP Growth In Fiscal 2026: EY

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.)