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India's GDP Growth to Outpace Peers at 7% by 2028, Says S&P

S&P Global Ratings projects India's real GDP growth will remain robust at 6.7% in fiscal 2027 and accelerate to 7% in fiscal 2028, outperforming sovereign peers. The ratings agency states the Union Budget reinforces expectations of gradual fiscal consolidation, with the government on track to meet its deficit targets. Lowered GST rates and income tax cuts are expected to boost middle-class consumption, making it a greater driver of growth than investment. While US tariffs pose a challenge, potential trade agreements and continued high capital expenditure aim to support manufacturing and infrastructure development.

Key Points: India GDP Growth Forecast 6.7% in 2027, 7% in 2028: S&P

  • 6.7% GDP growth forecast for FY27
  • 7% growth projected for FY28
  • Fiscal deficit targets seen as achievable
  • Consumption to become greater growth driver
  • Capital expenditure outlay rising to 5.6% of GDP
2 min read

India's GDP growth to place it above sovereign peers in next 2 fiscals: S&P Global Ratings

S&P Global Ratings forecasts robust 6.7-7% GDP growth for India, driven by consumer spending and public investment, placing it above sovereign peers.

"These growth rates continue to place India above sovereign peers at similar income levels - S&P Global Ratings Report"

New Delhi, Feb 2

Robust consumer spending and public investments will maintain India's real GDP growth at 6.7 per cent in fiscal 2027 and 7 per cent in fiscal 2028, S&P Global Ratings said on Monday, adding that the Union Budget reinforces its expectation of gradual fiscal consolidation.

The global ratings anticipates that these growth rates continue to place India above sovereign peers at similar income levels and should continue to support fiscal revenue increase.

The central government is set to meet its fiscal deficit estimate for fiscal 2026 (year ending March 31, 2026) of 4.4 per cent of GDP. It also budgeted for a 4.3 per cent deficit for fiscal 2027.

"These targets are broadly consistent with our projections. We believe India (BBB/Stable/A-2) will hit its fiscal 2027 deficit target despite the government budgeting for lower Goods and Services Tax (GST) receipts, following the streamlining of GST rates in September 2025," said the report.

"There is upside to GST revenues coming from stronger consumption and higher collection efficiency, in our view. In addition, support for meeting the deficit target will stem from continued large dividends from the central bank and potential capital underspending," it added.

The lowered GST rates will support middle-class consumption and complement income tax cuts. These changes are likely to make consumption a greater driver of growth compared with investment, both in this fiscal year and the next.

The spike in the effective U.S. tariff is weighing on the expansion of export-oriented manufacturing in India. In response, the fiscal 2027 budget has announced policies to support a manufacturing push and exports.

"If India can secure a trade agreement with the US, it should reduce uncertainty and enhance confidence, which would boost labour-intensive sectors," the report mentioned.

The government remains focused on investment-led growth. The budget allocation for capital expenditure is 3.1 per cent of GDP, the same in terms of GDP size from a year earlier.

But factoring in related capital spending, like grants to state governments and public enterprises, the total capital outlay will increase to 5.6 per cent of GDP in fiscal 2027, from 5.1 per cent the year before.

"We believe bottlenecks in executing infrastructure projects should ease as supply chain pressures lessen," it added.

- IANS

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Reader Comments

R
Rohit P
Good to see the fiscal discipline with deficit targets. But I hope this growth translates to more jobs on the ground, especially for our youth. The manufacturing push is key, but the US tariff issue is a real worry. A trade deal would be a game-changer.
A
Arjun K
The increase in total capital outlay to 5.6% of GDP is the most important part. Building roads, ports, and railways creates a foundation for decades of growth. Hope the execution bottlenecks ease as mentioned. Jai Hind!
S
Sarah B
As someone working in exports, the US tariff spike is a major headwind. The budget policies to support manufacturing are welcome, but we need that trade agreement urgently. It's not just about confidence, it's about survival for many MSMEs.
V
Vikram M
While the numbers look good on paper, I respectfully disagree that consumption should become a greater driver than investment. We are a developing economy. We need to build productive capacity first. Over-reliance on consumption can lead to inflation and import bills. The focus must remain on building factories, not just buying more goods.
K
Kavya N
The streamlining of GST is a relief! The previous system was so complicated for my small business. Higher collection efficiency mentioned in the report is already visible. More money for infrastructure and a simpler tax system? Win-win! 😊

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