India growth outlook: Economy may grow 6.9% in FY27; ‘Goldilocks’ phase likely to continue

India’s economy is expected to expand at a healthy 6.9 per cent in the 2026-27 financial year starting April 1, helped by structural reforms, tax measures and new trade agreements that could also soften the impact of global uncertainties, according to India Ratings & Research. As per news agency PTI, the agency said steps such as the Goods and Services Tax, income tax cuts and a series of free trade agreements would act as key growth drivers.Ind-Ra also expects the economy to remain in what it described as a “Goldilocks” phase, marked by strong growth and moderate inflation. Retail inflation is projected to average around 3.8 per cent in FY27. Chief economist Devendra Kumar Pant said a potential India-US trade deal, particularly one involving lower tariffs, could further add to GDP growth, according to PTI.For the current financial year, Ind-Ra has pegged real GDP growth at 7.4 per cent, while nominal GDP is seen rising by about 9 per cent. On the currency front, the rupee is expected to weaken slightly, averaging 92.26 against the US dollar in FY27, compared with an estimated 88.64 in the ongoing fiscal.The report also pointed to an improvement in government finances. The Centre’s debt is projected to ease to 55.5 per cent of GDP in FY27 from an estimated 56.3 per cent this year. The government, it noted, aims to bring this ratio down to around 50 per cent over the next three to four years.According to Ind-Ra, recently concluded free trade agreements, especially with New Zealand, the UK and Oman, are likely to support foreign investment inflows. These pacts could also help keep the current account deficit in check by attracting more overseas capital, Pant said.Looking ahead to the Union Budget for 2026-27, scheduled for February 1, Ind-Ra expects announcements around customs duty rationalisation and allocations under the Viksit Bharat–G RAM G Act. The report of the 16th Finance Commission, which recommends the tax devolution formula between the Centre and states for the five years beginning April 1, is also expected to be released the same day.On the fiscal numbers, Ind-Ra estimates that the total budget size could rise to Rs 52 lakh crore in FY27, up from the budgeted Rs 50 lakh crore in FY26. However, it expects the revised estimates for FY26 to come in lower, at around Rs 49 lakh crore, due to a shortfall in tax collections.Tax revenues in the current fiscal are seen missing the target by about Rs 2 lakh crore, PTI reported. This gap is expected to be bridged through higher non-tax revenues and slightly lower capital expenditure. Despite these pressures, the fiscal deficit for the current year is projected to remain at the budgeted 4.4 per cent of GDP, or Rs 15.69 lakh crore in absolute terms. Ind-Ra said the deficit number may rise in absolute terms in the revised estimates, even if the percentage stays unchanged.