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Press release
29 Sept 2025
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New Delhi, India
India’s FY26 growth outlook raised to 6.7% on back of monetary easing and GST 2.0 reforms: EY India
- Lifting disposable incomes and boosting consumption, the reforms are expected to offset short-term revenue shortfalls.
- India’s growth story remains resilient, underscoring the balance between reformdriven momentum and external challenges
New Delhi, 29 September 2025: EY’s Economy Watch September edition projects India’s real GDP growth in FY26 at 6.7%, an upward revision from earlier estimates of 6.5%. The increase reflects expectations of monetary easing alongside the demand stimulus from GST 2.0 reforms, even when some global headwinds continue to affect India’s export prospects in goods and services.
DK Srivastava, Chief Policy Advisor, EY India, said "With GST 2.0 reforms boosting disposable incomes and domestic demand, and trade diversification efforts opening new opportunities, India is well positioned to sustain its growth momentum in FY26. Strategic investments in technology and targeted policy measures will be key to translating reforms into long-term economic gains."
GST 2.0: A game-changer for demand and industry
The new structure consolidates rates into two slabs of 5% and 18%, alongside a special 40% rate, while eliminating the 12% and 28% categories. This rationalization is expected to lower prices across employment-intensive sectors such as textiles, consumer electronics, automobiles, healthcare, and food products. Producers in agriculture-linked sectors including fertilizers, agri-machinery, and renewable energy also stand to benefit from lower input costs, translating into wider gains for farmers. By lifting disposable incomes and boosting consumption, the reforms are expected to offset short-term revenue shortfalls, strengthen demand, and support the growth base.
India’s trade diversification challenge
Ongoing tariff-related uncertainties and supply chain disruptions in global trade present India with a timely opportunity to re-examine its trade pattern with the US and China. Currently, India’s export destinations and import sources remain concentrated, with considerable reliance on these two economies. This month’s In Focus section analysis highlights the need for diversification of trade ties, particularly by engaging more actively with BRICS+ nations to mitigate overdependence.
Policymakers have set a target of US$500 billion in Indo-US trade by 2030, equally split between exports and imports. Achieving this goal may require annualized growth of nearly 20% in key segments, particularly Indian exports of services to the US and imports of goods including crude, natural gas, and defence goods from the US. For services, further investments in AI-based technologies will be critical to sustaining competitiveness and scaling trade volumes.
With GST reforms boosting domestic demand, supportive monetary conditions, and opportunities to realign trade partnerships, India’s growth story remains resilient, underscoring the balance between reform-driven momentum and external challenges.
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