Latest EY Report Forecasts India's 6.5 Per Cent GDP Growth, Calls For Fiscal Reforms, Debt Cap, And Boost In National Savings

India’s real GDP growth is expected to remain steady at 6.5 per cent for the financial years 2025 and 2026, according to the latest EY Economy Watch report. The forecast hinges on the government's ability to implement fiscal measures that can support and sustain this growth trajectory.

The report outlines that India’s growth can be maintained at 6.5 per cent annually, provided the government accelerates its capital expenditure (capex) for the remainder of the current fiscal year.

Additionally, it stresses the need for a medium-term investment pipeline, with active participation from both the Government of India and state governments.

A key fiscal recommendation is to ensure that the combined debt of the central and state governments does not exceed 60 per cent of the country’s nominal GDP.

The report suggests that this target be split equally, with each government level capping its debt at 30 per cent of GDP. This would maintain fiscal discipline while allowing room for investments.

To further bolster growth, the report advocates for improvements in national savings. A national savings rate of 36.5 per cent of GDP in real terms, along with an additional 2 per cent contribution from foreign investments, would elevate the total investment level to 38.5 per cent. This level of investment is projected to support an annual growth rate of 7 per cent.

The report also calls for comprehensive reforms to the Fiscal Responsibility and Budget Management (FRBM) Act to enhance fiscal discipline while fostering long-term growth. 

A proposed fiscal deficit target of 3 per cent of GDP for both central and state governments would help achieve this goal. However, the central government should retain flexibility, allowing the deficit to range between 1 per cent and 5 per cent to manage unforeseen economic challenges.

By adopting these fiscal policies and ensuring balanced investments, India is well-positioned for sustained growth and economic stability in the years to come.

Also Read: India Targets Fiscal Deficit Of 4.5 Per Cent By FY26, Focus On Quality Spending And Social Security In Budget 2025: Finance Ministry Report