Speaking to CNBC-TV18, Rumki Majumdar, Economist at Deloitte India, said India’s growth momentum has surprised on the upside in FY25, driven by policy reforms and strong domestic demand.
“We are very optimistic. At the start of FY25, we were not so optimistic given the challenges, but the proactiveness shown by the government—through tax exemptions, GST reforms, monetary policy support and broader reforms—has helped India grow at around 8%, which very few analysts had expected,” Majumdar said.
She said the economy has begun the year on a strong footing, with growth in FY26 now expected to come in between 7.6% and 7.8%, supported by robust GST collections and sustained consumption.
“The third quarter is likely to be very strong, given the GST impact that will be felt then. With three quarters performing well, we remain hopeful on growth,” she added.
However, Majumdar cautioned that growth in FY27 could moderate due to global trade and geopolitical uncertainties, including the lack of clarity around a US trade deal.
“Next year could be a little more modest as global and trade uncertainties weigh on the outlook. That said, tax exemptions should continue to support demand and cushion some of the impact,” she said.
On fiscal policy, Majumdar said the government is likely to stay committed to its fiscal consolidation roadmap in the upcoming Budget.
“The government took a big bet by giving a fiscal push. What is important now is that it keeps the fiscal deficit on target, because that sends a strong signal to global investors about control over public finances,” she said, adding that the Centre is expected to stick to a 4.4% deficit target this year and attempt a further reduction next year.
MS Mani, Partner at Deloitte India, said concerns around a short-term moderation in tax collections are overblown and linked largely to temporary factors.
“Both direct and indirect tax collections are closely linked to economic activity. If firms are profitable, income tax rises. If consumption increases, GST collections rise. The recent moderation in GST collections is, to my mind, very temporary,” Mani said.
He added that performance in key sectors such as real estate, automobiles and infrastructure will be critical for revenue growth.
“If these major sectors—which contribute significantly to growth, employment and tax revenues—are firing, it is only a matter of time before both income tax and GST collections pick up,” he said.
Mani also pointed out that GST rate rationalisation has delayed revenue recovery but stressed that collections remain resilient.
“The decline in GST collections over the last two months has been quite moderate compared to expectations. Over the next two to three months, we could see collections rising again,” he said, expressing confidence that annual tax targets will be met.
“I am very positive that by year-end, tax collections will meet targets, which could nudge the fiscal deficit closer to 4.3%,” Mani added.
On the external front, Majumdar flagged geopolitical risks as a key concern for policymakers ahead of the Budget, particularly the impact of US tariffs and capital flows.
“Geopolitical developments are impacting the Indian economy in a significant way. FY25 saw about $18.5 billion in gross FPI outflows, the highest in five years for the April–October period,” she said.
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She noted that unresolved trade negotiations with the US and high tariffs on Indian exports continue to weigh on investor sentiment.
“Having a US trade deal in place is very important to assure investors that India’s economic fundamentals remain strong. The uncertainty is not about ‘if’ but ‘when’ the deal will happen,” Majumdar said.
At the same time, she said India’s push to diversify trade through free trade agreements is helping mitigate risks.
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“The government has done a good job of diversifying trade markets, with FTAs signed with the UK, New Zealand and Oman, and negotiations progressing with several other countries. These help cushion the impact of uncertainty around the US,” she said.
However, Majumdar warned that a slowdown in the US economy could still pose risks to India’s external balances.
“If the US slows and exports weaken, it could impact the current account, the currency and foreign exchange reserves,” she said.
Watch accompanying video for entire discussion
