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India Ratings & Research has projected India's economy to grow at 6.9 per cent in FY27, supported by reforms, trade agreements and stable inflation. Retail inflation is expected to average 3.8 per cent, while the rupee may weaken to an average of 92.26 per dollar. Government debt is projected to decline gradually, aligning with medium-term fiscal targets. The agency expects the FY27 budget size to rise to INR 52 lakh crore, even as FY26 revised estimates may be lower due to tax revenue shortfalls.
India Ratings & Research has projected India's economy to grow at 6.9 per cent in the 2026-27 financial year starting April 1, supported by structural reforms and expanding trade partnerships. The agency stated that measures such as the Goods and Services Tax, income tax reductions, and new trade agreements are expected to act as growth drivers while offering some protection against global economic uncertainty. Advertisement
According to the rating agency, the economy is likely to remain in a stable Goldilocks phase, marked by steady growth and moderate inflation. Retail inflation is expected to average 3.8 per cent in the coming financial year. The agency's chief economist, Devendra Kumar Pant, said an India US trade agreement with lower tariffs could further lift GDP growth.
For the ongoing financial year, India Ratings has maintained its projection of real GDP growth at 7.4 per cent, with nominal GDP expected to expand by around 9 per cent. On the currency front, the Indian rupee is projected to average 92.26 against the US dollar in FY27, compared to an estimated 88.64 per dollar in the current year.
The agency also expects an improvement in public finances. The Union government's debt-to-GDP ratio is projected to decline to 55.5 per cent in FY27 from an estimated 56.3 per cent in the current fiscal. The central government has earlier outlined plans to reduce this ratio to 50 per cent over the next three to four years.
India Ratings noted that recently signed Free Trade Agreements, particularly with New Zealand, the UK and Oman, are likely to support foreign investment inflows and help keep the current account deficit under control. Increased foreign capital is expected to play a role in offsetting external pressures.
Looking ahead to the upcoming Union Budget, Pant said announcements around customs duty rationalisation and allocations under the Viksit Bharat G RAM G Act framework are expected. The Union Budget for 2026-27 is scheduled to be presented on February 1, which will also see the release of the 16th Finance Commission's report. The report will outline the tax devolution formula between the Centre and states for the five-year period starting April 1.
On fiscal arithmetic, India Ratings expects the total budget size to increase to around INR 52 lakh crore in FY27, compared to a budgeted INR 50 lakh crore in FY26. However, revised estimates for FY26 are likely to be lower at about INR 49 lakh crore due to weaker-than-expected tax collections.
The agency estimates a tax revenue shortfall of nearly INR 2 lakh crore in the current fiscal year. This gap is expected to be bridged through higher non-tax revenues and a marginal reduction in capital expenditure. Despite these adjustments, the fiscal deficit is projected to remain at the budgeted level of 4.4 per cent of GDP, amounting to INR 15.69 lakh crore in absolute terms. While the absolute deficit figure may rise in the revised estimates, the deficit ratio is expected to be maintained.
Source PTI
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