EY Upgrades India's FY26 GDP Forecast to 6.7% on GST 2.0 Boost

Ernst & Young (EY) has increased its estimate for India’s real gross domestic product (GDP) growth in FY26 to 6.7%, up from the earlier 6.5%. The revision follows a strong performance in the June quarter, where GDP growth reached 7.8%, above the Reserve Bank of India’s projection of 6.5%.

GST 2.0 Reforms

The update comes after the introduction of GST 2.0, which simplified the rate structure. The new framework includes two slabs of 5% and 18%, along with a special rate of 40%. The earlier 12% and 28% slabs were removed. The changes are expected to lower prices for a range of goods and services.

Sectors Likely to Benefit

According to EY, employment-heavy sectors such as textiles, consumer electronics, automobiles, healthcare, and food products may see cost reductions. On the supply side, industries linked to agriculture, including fertilisers, farm machinery, and renewable energy, are likely to gain from lower input costs.

Short-Term Impact on Revenue

The firm noted that the new tax structure may cause a temporary dip in revenue collections. However, it added that higher demand, supported by lower prices, could offset this impact over time. The reduction in post-tax prices is expected to add to household consumption.

The report also pointed out that India’s trade remains highly dependent on the United States and China. With tariff-related uncertainties and supply chain issues, EY suggested that India may need to diversify both its export destinations and import sources. It highlighted opportunities within BRICS+ economies.

Read More: Moody’s Retains India’s Baa3 Rating with Stable Outlook Despite Fiscal Concerns!

Conclusion

EY’s September 2025 report shows a more optimistic outlook for FY26, with domestic reforms driving demand and external risks remaining a factor. The final growth forecast for the year is set at 6.7%.

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