NEW DELHI: India has to maintain a tax buoyancy in the range of 1.2-1.5 to achieve a growth of 6.5-7%, a EY report said on Wednesday.
The report also said that the govt may need to strengthen revenue mobilisation, particularly by increasing the tax-to-GDP ratio from the estimated 12% in FY26 (Budget Estimates) to 14% by FY31.
India’s fiscal strategy must focus on enhancing tax buoyancy, prudent expenditure management, and continued structural reforms to ensure sustainable growth, EY said. “EY India chief policy advisor D K Srivastava said the FY26 budget strategically balances fiscal consolidation with growth imperatives.
“For India to achieve a medium-term growth trajectory of 6.5-7% and realise its Viksit Bharat vision, it must ensure tax buoyancy remains in the 1.2-1.5 range. This would help create necessary fiscal room to accelerate infrastructure expansion, enhance social sector spending, and maintain fiscal discipline,” Srivastava added.
The EY India Economy Watch report noted that over the past three years, gross tax revenue buoyancy has gently moderated, from 1.4 in FY24 to 1.15 in FY25 (RE) and projected to be 11 in FY26(BE). “Maintaining tax buoyancy in the 1.2-1.5 range could help the Govt of India achieve 6.5-7% GDP growth,” the EY Report said.
Indian economy is projected to grow in range of 6.3-6.8% in next fiscal. In current fiscal, the GDP growth is estimated to be 6.4%. EY report further said over the past decade, the govt has reduced its fiscal deficit to GDP ratio from 4.1% in FY15 to 3.4% in FY19, with the ratio expected to adjust to 4.4% by FY26. agencies