FY27 GDP growth forecast revised upwards to 7.1%-7.4% with upside risk: CEA

Revising upwards India’s growth forecast to 7.6% in this fiscal, the new GDP series with an updated base year of 2022-23 has also given a more optimistic outlook for the economy in the coming fiscal.

Following the release of the second advance estimates of GDP growth in FY26 and the third quarter data based on the new series, Chief Economic Advisor V Anantha Nageswaran said that growth forecast for FY27 is also likely to be higher than the 6.8% to 7.2% presented in the Economic Survey.

As per the CEA, the Indian economy could grow at 7.1% to 7.4% next fiscal with a risk on the upside and growth likely to be closer to 7.4% in 2026-27. Global uncertainty would be a downside risk to growth, he told reporters. Fiscal deficit in FY26 could be marginally higher than the revised estimate, he further said, but underlined that the GDP revisions don’t alter the Budget projections as of now.

Nominal GDP growth is now seen to be closer to 11% in FY27 and the Indian economy will cross the $4 trillion mark in terms of size in FY27.

The CEA also noted that while we are on course to becoming the top three or four economies in the world, the timeline and ranking would depend on the exchange rate as well as the growth rates of other countries.

“Conditions support sustained growth of over 7%,” he told reporters. Favourable supply side conditions, including robust rabi sowing, favourable foodgrains tocks and easing global commodity prices are expected to keep inflation low and stable. Further, improved policy certainty resulting from successful trade agreements, including India-US and India-EU trade progress, to support exports and capital flows although their impact may be felt more in 2027, he said.

He also said that India’s lack of an AI story, which was seen as a disadvantage in 2025 may be an advantage in 2027 and could lead to improved capital flows.

However, the revision in the GDP base year would have an impact on the fiscal deficit projection for FY26, which is now likely at 4.5% of the GDP as against 4.4% in the revised estimates, the CEA said, while declining to give a revised target for FY27. He however, underlined that other deficit indicators including primary deficit and effective capex would remain the same.

DK Srivastava, Chief Policy Advisor, EY India explained that on a current‑price basis, nominal magnitudes for FY24 to FY26 are lower than those under the old series. This also means the overall size of the economy now appears smaller — for instance, nominal GDP for 2025‑26 is ₹345.5 lakh crore in the new series versus ₹357.1 lakh crore earlier. “Since fiscal deficit is calculated as a share of GDP, a lower GDP base automatically pushes the ratio up, raising the 2025‑26 (RE) fiscal deficit estimate from 4.36% to 4.51% of GDP even though the deficit amount itself is unchanged,” he said.

Aditi Nayar, chief economist, ICRA said this would also have some bearing on the debt consolidation roadmap, with the debt-to-GDP pegged 1.9pp higher at 57.5% for FY2027 as against the budgeted target of 55.6%, making the consolidation path unto FY2031 relatively steeper than previously estimated.

With the upward revision in growth outlook for FY26, most economists expect the economy to grow at 7% and above next fiscal. ICRA currently projects the GDP growth at about 7% in FY2027, amid favourable developments including the interim deal with the US with a lower tariff rate, improved prospects for domestic investment, aided by the robust hike in Central capital spending included in the Union Budget.

Madan Sabanvis, chief economist, Bank of Baroda said the agency expects growth of 7% to 7.5% in FY27. “Based on the nominal GDP growth rate, we don't expect fiscal numbers to change significantly,” he said.