EY raises India's FY26 growth forecast to 6.7% on GST 2.0 boost

EY on Monday raised its projection for India’s real GDP growth in FY26 to 6.7%, up from its earlier 6.5% estimate, owing to the recent GST reforms.

The firm’s Economy Watch September edition said the upward revision reflects expectations of monetary easing and stronger domestic demand from GST 2.0 reforms, despite global headwinds weighing on exports.

DK Srivastava, Chief Policy Advisor at 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 to lift demand and lower costs
The new GST structure consolidates rates into two slabs of 5% and 18%, with a special 40% rate, while eliminating the 12% and 28% categories. EY noted that the changes will reduce prices in employment-intensive sectors such as textiles, consumer electronics, automobiles, healthcare, and food products.

Agriculture-linked industries, including fertilizers, agri-machinery, and renewable energy, are expected to benefit from lower input costs. By easing household budgets and spurring consumption, the reforms are projected to strengthen demand and offset short-term revenue pressures.

Tariff uncertainties and trade under focus
EY’s report flagged tariff uncertainties and supply chain disruptions as risks for India’s export prospects. It said India remains heavily dependent on the US and China for both exports and imports, underlining the need for deeper engagement with BRICS+ economies to reduce over-reliance.

Policymakers have set a target of US$500 billion in bilateral trade with the US by 2030, equally split between exports and imports. Meeting the target will require annual growth of nearly 20% in key areas, particularly services exports and imports of crude, natural gas, and defence goods, said the report. EY added that scaling service exports will depend on greater investment in AI-driven technologies.

EY said that with GST-led domestic stimulus, expected monetary easing, and opportunities to reshape trade ties, India’s growth outlook remains resilient. The balance between reform-driven momentum and external challenges will determine how strongly the economy sustains its pace in FY26.