Title: India’s Economy Set to Grow at 6.5% in FY26: EY Report Highlights Growth Drivers and Fiscal Strategy

India’s economy is projected to expand robustly at 6.5% in the fiscal year 2025-26 (FY26), continuing its trajectory of steady growth amid evolving global and domestic challenges, according to the latest EY Economy Watch report. This forecast builds on strong GDP growth in recent years and underscores the critical role of fiscal management and investment in human capital to sustain long-term prosperity.

India’s Economic Growth Outlook: A Continued Upward Trajectory

The EY Economy Watch report projects India’s real GDP to grow by 6.4% in FY25 and accelerate slightly to 6.5% in FY26. This comes on the heels of impressive growth rates of 7.6% in FY23 and a remarkable 9.2% in FY24, marking India as one of the fastest-growing major economies globally[1][2][4].

• FY23 GDP growth: 7.6%
• FY24 GDP growth: 9.2%
• FY25 projected growth: 6.4%
• FY26 projected growth: 6.5%

Despite the strong momentum, achieving the 6.5% target for FY26 requires a notably strong performance in the last quarter of FY25, with a 7.6% GDP growth rate anticipated to meet the annual projection[1][2]. This poses a significant challenge, especially given that private consumption expenditure would need to surge by an exceptional 9.9% in that quarter—a level unseen in recent years.

Key Factors Driving India’s Growth in FY26

Private Consumption and Investment Expenditure

Private consumption remains a critical engine of India’s economic growth. However, given the difficulty in achieving nearly 10% consumption growth in the last quarter of FY25, EY’s report suggests a strategic pivot towards boosting investment expenditure, especially government capital spending. This includes:

• Enhanced public infrastructure projects
• Policy support to incentivize private sector investments

Such an approach is aimed at maintaining economic momentum and cushioning against fluctuations in private consumption[1][2].

Fiscal Strategy and Government Spending

Fiscal management emerges as a pivotal concern in the EY report. While supplementary demand for grants may widen the fiscal deficit, an expanding nominal GDP is expected to provide a partial buffer by reducing the relative weight of these expenditures[1][2].

A well-calibrated fiscal policy is essential to balance growth stimulus with financial stability. This involves:

• Prudent deficit management
• Targeted investment in sectors that enhance productivity and human capital

Focus on Human Capital Development

With India’s population continuing to grow and the economy undergoing structural transformation, EY emphasizes increased government spending on education and healthcare as indispensable for sustaining high growth over the next two decades. The report aligns with the view that India must gradually raise its expenditure on these sectors to levels comparable with high-income countries to:

• Improve workforce quality
• Boost productivity
• Support inclusive development

Investing in human capital is expected to yield long-term benefits by enabling India to fully capitalize on its demographic dividend[2].

Economic Challenges and Opportunities Ahead

Meeting the High Growth Target in Q4 FY25

The forecasted need for a 7.6% GDP growth rate in Q4 FY25 to meet the annual 6.5% target is ambitious. The 9.9% growth in private final consumption expenditure necessary for this highlights the challenge of maintaining robust consumer demand in the short term[1][2].

Role of Infrastructure and Private Investment

Public infrastructure investment is expected to play a decisive role in complementing private consumption. Government-led capital spending not only creates jobs but also builds the foundation for future economic activity—critical for maintaining growth momentum amid global uncertainties[1].

Fiscal Discipline Amid Expanding Expenditures

The government’s ability to manage the fiscal deficit prudently while increasing spending on human capital and infrastructure will be closely watched. A higher nominal GDP provides leeway to absorb increased expenditures, but maintaining market confidence requires careful policy calibration[1][2].

India’s Growth in the Global Context

India’s projected 6.5% growth rate in FY26 stands out against a backdrop of moderated global growth. The OECD estimates global growth to ease slightly from 3.2% in 2024 to 3.1% in 2025, highlighting India’s role as a growth engine in a slower global economy[3].

Summary: What This Means for India’s Economy and Policy Makers

India’s economy is poised to continue its upward growth trend with a projected 6.5% GDP expansion in FY26. However, reaching this goal hinges on several critical factors:

• Sustaining strong private consumption or compensating through increased investment, especially government-led capital spending.
• Maintaining prudent fiscal management to balance support for growth and long-term financial stability.
• Accelerating investments in education and healthcare to enhance human capital and productivity.
• Fostering a policy environment that encourages private investment and infrastructure development.

This balanced approach could enable India not only to achieve its near-term growth targets but also to lay the foundation for Viksit Bharat—the vision of a developed, inclusive, and resilient economy.

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By focusing on these key areas, India aims to harness its demographic advantage and solidify its stance as a leading global economy amid evolving challenges and opportunities.

Keywords: India economy growth FY26, India GDP forecast 2025, EY Economy Watch report, Indian fiscal strategy, private consumption India, government investment India, human capital development India, infrastructure spending India, fiscal deficit India 2025, Indian economic outlook 2025-26, Viksit Bharat, India economic growth drivers.