Implementing trade deals with large economies like the European Union and the United States will likely boost capital inflows and support consumption demand, helping the Indian economy to expand at a higher pace of 7.2–7.4% in FY27, compared with the earlier estimate of 6.8–7.2%, Chief Economic Adviser V. Anantha Nageswaran said on Friday.
Trade Accords
This signalled growing confidence in the country’s medium-term growth trajectory.
The upward revision follows the release of a new national accounts data series, under which the Second Advance Estimate for FY26 pegs growth at a robust 7.6%—higher than the 7.4% calculated using the previous series and well above FY25’s 7.1%.
Navigating the $4-Trillion Milestone
Nominal GDP growth for FY27 is projected at close to 11% (as against 10% estimated earlier in the old series), which would push the economy comfortably past the $4-trillion mark in FY27, he said.
“Improved policy certainty resulting from successful trade agreements, including India-US and India-EU trade progress, will support exports and capital flows. Economic Survey’s projection for FY27 is revised upwards to 7% – 7.4% under the new series,” Nageswaran said.
However, their full impact will likely be visible only in FY28 once implementation cycles mature, he said. “Although the full year’s impact on exports may be felt in 2027-28, there will be some positive impact on capital formation, which in turn will also spill over into consumption, and that is the rationale (for the growth upgrade for 2026-27),” he said.
From an expenditure perspective, he emphasised that both consumption and investment will remain central drivers of expansion. Private investment sentiment, buoyed by policy clarity and lower global volatility, could strengthen alongside public capital expenditure and production-linked incentive schemes already reflected in improved manufacturing data.
Nageswaran reiterated that the country is on course to become one of the world’s top three or four largest economies in the next few years, though the exact timing will depend on exchange-rate movements and the relative growth rates of other G20 economies. Currency depreciation in 2025 temporarily weighed on dollar-denominated GDP, but improved capital inflows following trade accords could stabilise the exchange rate and better reflect underlying domestic performance.
On monetary policy, he noted that the inflation-targeting framework is currently under review through consultations led by the Reserve Bank of India and the Ministry of Finance. The existing 4% ±2% target band has served the economy well over the past decade, helping anchor expectations and moderate inflation. Any decision on its continuation or modification will be announced later this year after the review process concludes.
Overall, the policy and reform trajectory, combined with trade integration and investment momentum, is expected to sustain non-inflationary real growth of about 7% and nominal growth of 10–11% in the coming years, he added.