India's Economy Projected to Grow 6.9% in FY 2026-27

On January 6, India Ratings and Research projected India's economic growth at 6.9% for the upcoming fiscal year 2026-27. The rating agency stated that key reforms such as reductions in Goods and Services Tax (GST) and income tax, along with trade agreements, will boost economic activities and shield the economy from global disruptions.

India Ratings' Chief Economist Devendra Kumar Pant said that next fiscal year, the economy is expected to maintain a high growth rate with low inflation (average retail inflation at 3.8%). Reduced tariffs under the India-US trade agreement are expected to further enhance GDP growth figures.

The agency estimated that for the current fiscal year, GDP growth will be 7.4% based on the base year 2011-12, and nominal GDP will reach 9%. India Ratings expects the Indian Rupee to average 92.26 per USD in FY 2026-27, up from 88.64 per USD in the current fiscal year.

The agency also noted that free trade agreements (FTAs) with countries like New Zealand, the UK, and Oman will promote foreign investment, attracting more capital and helping to maintain the current account deficit (CAD).

Pant mentioned that rationalizing customs duties and allocations under the Developed India-Ram-JI Act are expected to be major announcements in the Union Budget 2026-27 on February 1. Additionally, the 16th Finance Commission report, also expected on February 1, will suggest revenue-sharing ratios between the Centre and states for the next five years starting April.

According to the agency's estimates, tax revenue for the current fiscal year is expected to fall by ₹2 lakh crore, which will be offset by non-tax revenue and minor reductions in capital expenditure. The fiscal deficit is projected at 4.4% of the budget and ₹15.69 lakh crore in absolute terms. Revised estimates may increase the absolute figure, though the percentage will remain at 4.4%.