EY Report Projects 6.5% Growth in FY26 For India

The EY Economy Watch report estimates that India’s GDP will grow by 6.5% in FY26, highlighting the need for strategic fiscal management. The report suggests that to sustain economic expansion, India must prioritize investments in education and healthcare, increase government capital spending.

Shivam Last updated on April 2nd, 2025 11:15 am

The latest EY Economy Watch report projects India’s GDP growth at 6.5% for FY26 (April 2025 – March 2026), emphasizing the importance of a well-calibrated fiscal strategy that balances economic expansion and fiscal prudence. The report highlights the need for increased government investment in human capital development, particularly in education and healthcare, to sustain long-term growth. It also underscores the necessity of raising the revenue-to-GDP ratio and implementing equalization transfers to bridge regional disparities.

Key Findings of the EY Report

Revised GDP Growth Estimates (NSO Data)

FY23: 7.6%
FY24: 9.2%
FY25: 6.5% (projected)

Q3 & Q4 FY25 Growth Analysis

Q3 FY25 growth: 6.2%
Q4 FY25 required growth: 7.6% to achieve the annual 6.5% target
Achieving 7.6% in Q4 will require a 9.9% growth in private consumption, which is unprecedented in recent years.
Alternative strategy: Increase investment expenditure, with a focus on government capital spending.

Fiscal Deficit and Government Spending

The fiscal deficit may widen due to supplementary demand for grants.
Higher nominal GDP may help absorb some fiscal pressures.
Fiscal prudence and strategic investments in human capital are needed.

Investment in Education & Healthcare

Education spending: Needs to increase to 6.5% of GDP by FY2048 from the current 4.6%.
Healthcare spending: Should rise to 3.8% of GDP by FY2048, up from 1.1% in 2021.
Strengthening human capital will drive sustained long-term growth.

Equalization Transfers for Low-Income States

Low-income states with younger populations will require additional financial support.
Equalization transfers can help bridge gaps in education and healthcare access.
Fiscal restructuring will require raising the revenue-to-GDP ratio from 21% to 29%.

Workforce and Economic Structural Changes

India’s demographic dividend (increasing working-age population) can drive,

Higher employment rates
Increased savings and investments
Sustainable economic expansion
Government policies must align investment in education and healthcare to maximize economic potential.

Summary/Static	Details
Why in the news?	EY Report Projects 6.5% Growth in FY26 For India
Projected GDP Growth (FY26)	6.5%
Revised GDP Growth Rates FY23	7.6%, FY24: 9.2%, FY25: 6.5%
Q3 FY25 Growth	6.2%
Q4 FY25 Required Growth	7.6% (needs 9.9% private consumption growth)
Alternative Growth Strategy	Increased investment expenditure and government capital spending
Fiscal Deficit	Potential increase due to supplementary demand for grants
Education Spending Target	6.5% of GDP by FY2048 (currently 4.6%)
Healthcare Spending Target	3.8% of GDP by FY2048 (currently 1.1%)
Revenue-to-GDP Ratio	Target Increase from 21% to 29%
Equalization Transfers	Support low-income states for education & healthcare