NEW DELHI (February 26, 2026) — India’s real Gross Domestic Product (GDP) is forecast to grow between 6.8 percent and 7.2 percent in the 2026-27 financial year (FY27), according to the latest Economy Watch report by EY India. The projections, released on Thursday, suggest that India will maintain its trajectory as the world’s fastest-growing major economy for the fourth consecutive year, bolstered by a landmark series of bilateral trade agreements and a strengthening domestic fiscal architecture.
Trade Breakthroughs and Medium-Term Prospects
The report attributes the brightened economic outlook to India’s aggressive “multi-alignment” trade strategy. In early 2026, India finalised two “mega-partnerships” that have fundamentally realigned its global trade position:
- The US-India Trade Deal: Signed on 2 February 2026, this agreement reduced “reciprocal” tariffs on Indian goods from 50 percent to approximately 18 percent.
- The EU-India FTA: Finalised in late January 2026, the deal provides duty-free access for 99 percent of Indian exports to the European market, particularly benefiting labour-intensive sectors such as textiles and leather.
“In the background of India’s extensive bilateral trade agreements with other major economies or economic groups, India’s medium-term prospects have brightened up,” stated D. K. Srivastava, EY India’s Chief Policy Advisor.
Fiscal Strategy for ‘Viksit Bharat’ 2047
To achieve the national goal of becoming a developed economy (Viksit Bharat) by 2047, the EY report emphasizes the need for a robust fiscal framework. Analysts suggest that while major structural tax reforms—such as the 2025 rationalisation of GST slabs—have already taken place, the focus must now shift toward widening the tax base.
Key recommendations for fiscal sustainability include:
- Enhanced Tax Compliance: Increasing the tax-GDP ratio primarily through improved enforcement and digital compliance rather than new tax hikes.
- Expenditure Realignment: Recasting the Fiscal Responsibility and Budget Management (FRBM) architecture to prioritise high-impact capital expenditure in technology and defence.
- Fiscal Consolidation: The report estimates that the Centre may target a fiscal deficit reduction of 40 basis points in FY27, aiming for a 4 percent target if the FY26 goal of 4.4 percent is met.
Sectoral Performance and Salary Trends
Complementing the GDP outlook, EY’s Future of Pay 2026 report, released earlier this week, indicates that economic normalisation is reflected in the labour market. Overall salary increments in India are projected at 9.1 percent for 2026. Global Capability Centres (GCCs) are expected to lead with 10.4 percent raises, followed by the Financial Services sector at 10 percent, highlighting the continued demand for specialised digital and AI-led skill sets.
Sources
- EY India Economy Watch: “Fiscal Architecture for Viksit Bharat” (February 2026)
- Press Trust of India (PTI): “India’s GDP to grow between 6.8-7.2 pc in FY27: EY Economy Watch” (February 26, 2026)
- EY Future of Pay 2026 Report: “India Inc. projects 9.1% salary increase” (February 23, 2026)
- Ministry of Commerce and Industry: “Update on US and EU Trade Agreements” (February 2026)
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