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2h ago

EY Lifts India FY26 Growth Outlook to 6.7% on GST 2.0, With Rate-Cut Calls Growing

Cooling inflation gives the RBI space to consider easing, with tax-slab changes expected to lift household demand.

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Overview

  • EY’s September Economy Watch cites GST 2.0 and prospective monetary easing in raising its FY26 real GDP forecast to 6.7% from 6.5%.
  • The new GST structure consolidates most rates to 5% and 18% with a special 40% category, which EY says should lower prices in labour‑intensive sectors and support consumption.
  • India logged 7.8% real GDP growth in Q1 FY26, with OECD data showing a 7.3% seasonally adjusted pace that topped the G20, and PMIs signalled continued momentum into Q2.
  • The RBI’s August review projected average consumer inflation of about 3.1%, reinforcing expectations of policy space as nominal growth eases with disinflation.
  • External risks remain prominent as higher US tariffs threaten exports in textiles, gems and jewellery, and seafood, and CRISIL’s chief economist argues for a 25 bps repo cut as early as October.