According to EY India's most recent "Economy Watch" report, India's higher nominal GDP growth in FY27 is expected to assist the government in controlling its fiscal deficit amid worldwide uncertainty.
According to the report, greater inflation is predicted to boost nominal GDP growth, enhancing tax collections and assisting the Center in managing its budget, even though actual economic growth may slow down from FY26 levels due to global challenges.The possibility of comparatively stronger nominal GDP growth compared to FY26 is one significant aspect of FY27 development, according to the research.
"Combining this with a real GDP growth of 6.7%, we may have a nominal growth of about 12.5% in FY27," explained EY. Fiscal prospects would benefit from this, especially with regard to tax revenues.

The entire value of goods and services generated in the economy at current prices is measured by nominal GDP. Even if real economic growth slows, higher nominal growth typically results in larger tax revenues, giving the government more money.
The monthly macro-fiscal report states that although spending on subsidies may surpass budgetary projections, the Center should be able to absorb the revenue impact of any excise duty reductions through increased tax revenues.GoI should be able to realize its tax revenue projections while absorbing the negative revenue impact of any reductions in excise duties. However, subsidies could go beyond budget in terms of spending. We anticipate that the anticipated fiscal deficit of 4.3% of GDP for FY27 will either be realized or slightly surpassed," EY stated.

According to the report, the fiscal deficit decreased from Rs 15.8 lakh crore in FY25 to Rs 15.2 lakh crore in FY26, effectively meeting the Center's revised objective of 4.4% of GDP.
Restoring public investment would be crucial for maintaining growth, according to EY, which also noted that government capital spending growth fell significantly to 1.6% in FY26 from 10.8% a year earlier.According to the paper, "it is desirable to restore capital expenditure growth and at least achieve the budgeted growth of 11.5% for FY27."

In the future, EY predicted that India's real GDP will increase by 6.6–6.8% in FY27, assuming that global crude oil prices stay low and that shipping over the Strait of Hormuz return to normal. It projects nominal GDP growth of 12.5%, CPI inflation of 4.5%, a fiscal deficit of 4.4% of GDP, and a current account deficit of 1.5% of GDP under this scenario.The positive momentum of India's economic prospects is likely to be recovered if global crude prices settle at comparatively lower levels and shipments via the Strait of Hormuz normalize, given the recent geopolitical developments, according to the report.