EY Economy Watch has said that the Indian economy is likely to grow at 6.5 per cent in the fiscal year starting April 1.

It emphasised that a well-calibrated fiscal strategy that supports human capital development while maintaining fiscal prudence could significantly enhance long-term growth prospects.

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The March edition of EY Economy Watch projects India’s real GDP growth at 6.4 per cent in FY25 while for the next, it projects 6.5per cent growth, highlighting the need to realign fiscal policy to support the country’s journey toward Viksit Bharat.

“A 7.6 per cent growth in the last quarter will require a 9.9 per cent growth in private final consumption expenditure. Such a high growth has not been experienced in recent years,” the report said.

“An alternative to this is to increase investment expenditure, where the government’s capital expenditure growth plays a critical role,” it added.

The EY India report said that over the next two decades, India may need to gradually increase its general government education and health expenditures, bringing it closer to levels seen in high-income countries.

The analysis suggests that education spending by the government may need to rise to 6.5per cent of GDP by FY2048 from its current 4.6per cent, considering India’s young population and growing workforce requirements.

Government health expenditure may need to increase to 3.8 per cent of GDP by FY2048, compared to 1.1per cent in 2021, to ensure improved healthcare access and outcomes.

It also highlighted that the fiscal deficit of the government as per the revised estimates may be affected by any subsequent supplementary demand for grants.

The higher level of nominal GDP may provide some cushion for absorbing some of these supplementary increases when fiscal deficit is measured relative to GDP.

Notably, as per the revised national accounts data released by NSO last month, real GDP growth rates for FY23 to FY25 are now estimated at 7.6 per cent, 9.2 per cent and 6.5 per cent.