India’s real growth performance expected to see short-term setback: EY

India’s impressive real growth performance is expected to experience a short-term setback, with real gross domestic product (GDP) growth projected to decline in fiscal 2026-27 (FY27), according to EY India.This slowdown is likely to be driven largely by exogenous factors, particularly the Middle East crisis, leading to supply bottlenecks and price shocks affecting sectors like crude oil, gas and fertilisers, it said in its Economy Watch publication.

India’s impressive real growth performance may see a short-term setback, with growth projected to drop in FY27, EY said.
This is likely to be driven largely by exogenous factors, leading to supply bottlenecks and price shocks affecting many sectors, it said in its Economy Watch.
EY expects India’s FY27 budgeted fiscal deficit at 4.3 per cent of GDP to be either realised or marginally exceeded.

With a quick normalisation of the Middle East situation, pressure on inflation might ease somewhat in the last three quarters of this fiscal. However, it might still be in the range of 4.5-5 per cent, it noted.

An important feature of FY27 growth is the likelihood of relatively higher nominal GDP growth as compared to FY26.

With a speedy resolution of the West Asian crisis, EY considers wholesale price index-based (WPI) and consumer price index (CPI)-based inflation rates for the full year to be lower at 6 per cent and 4.5 per cent, D K Srivastava, chief policy advisor of EY India, wrote.

EY India expects the FY27 budgeted fiscal deficit at 4.3 per cent of GDP to be either realised or marginally exceeded.

It is desirable to restore capital expenditure growth and at least achieve the FY27 budgeted growth of 11.5 per cent, the publication added.

Fibre2Fashion News Desk (DS)