India needs 1.2-1.5 tax buoyency to achieve 6.5-7% growth: Ey

A Noted Economist, DK Srivastava is an honorary professor at madras school of economics and member of the Advisory Council to the 15th Finance Commission. Photo: https://www.ey.com/

“India has to maintain a tax buoyency in the range of 1.2-1.5 to achieve a growth of 6.5-7%,” an Ey report Said on Wednsday, February 26, 2025.

The report also said that the government 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 buoyency, prurent experture management, and continued structural reforms to ensure sustainable green,” Ey said.

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Ey India Chief Policy Advisor DK Srivastava said the fy26 budget strategically balances fiscal consolidation with growth imperatives.

“However, for India to achieve a medium-term growth training of 6.5-7.0% and realize its viksit bharat vision, it must enjoy, tax buoyancy remains in the 1.2-1.5 range. This would help create the Necessary Fiscal Room to Accelerate Infrastructure Expensation, Enhance Social Sector Spending, and Maintente Fiscal Discipline, ” Srivastava Added.

The Eye India Economy Watch Report Noted That Over the Past Three Years, Gross Tax Revenue Buoyance has gently moderated, from 1.4 in fy24 to 1.15 in fY25 (re) and projected to be 1.07 in fy26 (be). “MainTaining Tax Buyaancy in the 1.2-1.5 range could help the government of India achieve 6.5-7.0% GDP growth,” The eye report said.

Indian Economy is projection to grow in the range of 6.3-6.8% in the next fiscal. In the current fiscal, the GDP growth is estimated to be 6.4%.

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Ey report further said that over the past decade, the government has reduced its fiscal deficit to gdp ratio from 4.1% in fy15 to 3.4% in fy19, with the ratio experted to adjust to 4.4% by. It needs to be steadily reduced to the frbm consistent level of 3%, it added.