India`s real GDP growth to be in 6-7 pc range in FY27, capex to grow by 14 pc
India’s real GDP growth in FY27 is expected to be in the range of 6–7 per cent, supported by domestic consumption, interest rate cuts, and public capital expenditure, according to a new report.
For budgetary analysis, ICRA used the NSO’s ‘First Advance Estimates’ of nominal GDP of Rs 357.1 trillion for FY26, reflecting a growth of 8.0 per cent, and its own estimate of Rs 392.0 trillion for FY27, implying nominal GDP growth of around 9.8 per cent.
The rating agency further said that it expects the government to cap the fiscal deficit at 4.3 per cent of GDP in FY27, compared to the Budget Estimate of 4.4 per cent in FY2026, assuming nominal GDP growth of 9.8 per cent.
“The FY27 Budget is expected to reflect a shift in focus from annual fiscal deficit targets to a medium-term debt consolidation path, especially in the context of the forthcoming 16th Finance Commission recommendations,” the report mentioned.
ICRA also expects the government to increase capital expenditure by around 14 per cent to Rs 13.1 trillion in FY27, equivalent to 3.3 per cent of GDP.
This follows a likely overachievement of the capital expenditure target in FY26, with capex estimated at Rs. 11.5 trillion, compared to the BE of Rs 11.2 trillion.
“The acceleration in capital expenditure in FY27 is expected to occur before fiscal rigidities increase from FY28 onwards, due to higher committed expenditure related to salary and pension payouts following the 8th Central Pay Commission recommendations,” said the report.
The rating agency also expects gross tax revenues to grow by around 7 per cent in FY27, led by direct tax growth of around 11 per cent.
In contrast, indirect tax revenues are expected to grow by a subdued 2 per cent, primarily due to the impact of GST rate cuts implemented from September 2025, said the report.
