NEW DELHI: India’s real GDP growth for FY26 is now projected at 6.7%, up from the earlier 6.5%, according to EY India’s September edition of Economy Watch. The revision reflects expectations of monetary easing and the demand stimulus from GST 2.0 reforms, even as global headwinds weigh on exports.
“With GST 2.0 reforms boosting disposable incomes and domestic demand, and trade diversification efforts opening new opportunities, India is well positioned to sustain its growth momentum in FY26,” said DK Srivastava, Chief Policy Advisor, EY India. He added that strategic investments in technology and targeted policy measures would be crucial to translating reforms into long-term gains.
GST 2.0 boost
The new GST structure has consolidated rates into two slabs of 5% and 18%, with a special 40% rate, while eliminating the 12% and 28% categories. The rationalisation is expected to reduce prices across sectors such as textiles, consumer electronics, automobiles, healthcare, and food products. Agriculture-linked industries, including fertilizers, agri-machinery, and renewable energy, are also expected to benefit from lower input costs.
EY noted that the reforms, by lifting disposable incomes and spurring consumption, are likely to offset near-term revenue shortfalls, strengthen demand, and support the growth base.
Trade diversification imperative
The report flagged India’s continued reliance on the US and China as major trade partners, calling for diversification towards BRICS+ economies to mitigate risks from tariff-related uncertainties and supply chain disruptions.
Policymakers have set a target of USD 500 billion in Indo-US trade by 2030, evenly split between exports and imports. To achieve this, Indian exports of services to the US will need to expand rapidly, while imports of crude, natural gas, and defence goods are set to grow. EY underlined that scaling service exports will require greater investment in AI-driven technologies to sustain competitiveness.
Despite external challenges, EY said India’s growth outlook remains resilient, supported by domestic demand, accommodative monetary conditions, and opportunities for trade realignment.