EY raises India's GDP forecast to 6.7%; recommends diversifying markets

The 7.8 per cent GDP growth in the June quarter outperformed the Reserve Bank of India's expectation of 6.5 per cent growth during the August monetary policy meeting

EY raised India's real gross domestic product (GDP) projection for the financial year 2025-26 (FY26) to 6.7 per cent, up from the previous 6.5 per cent on the back of strong growth in the June quarter and goods and services tax (GST) reforms.

 

In its 'Economy Watch' report for September 2025, EY said, "With 1QFY26 real GDP growth at 7.8 per cent and stimulation of demand through GST reforms on the one hand, constrained by global headwinds affecting India’s export prospects, both in goods and services, we expect India to still show an annual real GDP growth of 6.7 per cent in FY26."

 

The 7.8 per cent GDP growth in the June quarter outperformed the Reserve Bank of India's (RBI's) expectation of 6.5 per cent growth during the August monetary policy meeting.

Need to diversify markets

According to EY, the ongoing tariff-related uncertainties and supply chain disruptions provide an opportunity for India to re-examine the pattern and composition of its international trade with the rest of the world, especially with the US and China. 

 

The report further added that the base of India’s export destinations and import sources is "narrow". "India is considerably dependent on the US and, to some extent, on China. India may do well to diversify its export destinations and import sources, seeking more opportunities amongst the Brics countries and reducing its reliance both on the US and China," said DK Srivastava, chief policy advisor, EY India.

GST 2.0 to benefit automobiles, agri sector

Under the GST 2.0 rollout earlier this month, rates were rationalised at 5 per cent and 18 per cent, with a special rate of 40 per cent. This is likely to benefit several sectors, including automobiles, health, and textiles.

 

Srivastava said: "The new rate structure implies significant rate reductions for some categories of goods. Major beneficiary sectors include textiles, consumer electronics, automobiles, health and most food items. These are employment-intensive sectors where the benefits of lower prices may be quite broad-based."

 

"On the production side, sectors that may benefit include fertilisers, agricultural machinery and renewable energy. In these sectors, farmers may benefit from lower input costs. Initially, some short-term revenue impact is expected," he said.

 

EY expects that with a substantial decline in post-tax prices, demand will increase, and eventually the revenue losses may be made up.