India’s real GDP is projected to grow 6–7% in FY27, supported by robust domestic consumption, interest rate cuts, and higher public capital expenditure, according to a recent ICRA report.
For its analysis, ICRA used the NSO’s ‘First Advance Estimates’ of nominal GDP at Rs 357.1 trillion for FY26, reflecting 8% growth, and projected nominal GDP at Rs 392.0 trillion for FY27, implying growth of around 9.8%. The agency expects the government to cap the fiscal deficit at 4.3% of GDP in FY27, slightly below the FY26 Budget Estimate of 4.4%, assuming the projected nominal GDP growth.
The report noted that the FY27 Budget is likely to shift focus from annual fiscal deficit targets to a medium-term debt consolidation path, particularly considering the upcoming 16th Finance Commission recommendations.
ICRA projects capital expenditure to rise about 14% to Rs 13.1 trillion in FY27, equivalent to 3.3% of GDP, following likely overachievement of the FY26 capex target at Rs 11.5 trillion versus the Budget Estimate of Rs 11.2 trillion. The acceleration in capex is expected before fiscal rigidities increase from FY28 onward due to higher committed expenditures on salaries and pensions following the 8th Central Pay Commission recommendations.
The agency expects gross tax revenues to grow roughly 7% in FY27, driven by an estimated 11% growth in direct taxes, while indirect tax revenues are projected to grow only 2%, mainly due to GST rate cuts implemented from September 2025.
