Despite ongoing global geopolitical challenges, India’s economy is expected to maintain its position as the fastest-growing in the world, with potential for even stronger performance, Finance Minister Nirmala Sitharaman has said.

In an interview to businessline, the FM said the Centre is likely to convey to the Finance Commission that its financial position is considered before a decision is made on revising the vertical devolution of funds to the States. The FM simultaneously informed that intense work is under way on GST rate rationalisation and the option of higher GST rate on sin goods post March 31, 2026 cannot be ruled out.

Key strategies

The Minister expressed confidence in India’s growth trajectory and outlined key strategies to accelerate it further. “We are also, at the macro level, conscious that we need to have more trade agreements, need to open up on very many more sectors, make banks be more amenable for industry and their needs, and make banks understand that credit should be tailored to the requirement of different segments. With all that done, I don’t see any reason for us to worry about our growth. We will continue to be the fastest growing at this number or even better number,” she said.

While the Economic Survey has projected a growth rate between 6.3 per cent and 6.8 per cent for FY26, the Reserve Bank of India has forecast 6.5 per cent growth.

As various agencies are in the process of completing sovereign ratings, the Minister hoped that they will consider more positive factors such as energy surplus, availability of credit from the banks, mobility and rising purchasing power of people beside others. “I think there will be a lot more reasons governing their judgement,” she said. India has not seen rating upgrades for more than a decade, though outlook has been changed.

Finance Commission

As States are pressing for higher devolution for the five-year period starting April 1, 2026, Sitharaman indicated that the Centre will have one more meeting with the 16th Finance Commission to underline its perspective with regard to Central finances. She said that even though the 14th Finance Commission had made recommendations about rationalising CSS (Centrally Sponsored Schemes) while raising the devolution to states to 42 per cent from 32 per cent, the Centre had not wound them down.

“There are still a lot of projects which Centre is financing despite the Central share having come down. There is definitely an issue of the Centre borrowing for everything. After all the devolutions and giving away for different categories, it’s not left with anything substantial,” she said. It may be noted that recommendations regarding devolution are binding on the government. The 15th Finance Commission recommended maintaining the vertical devolution at 41 per cent.

Goods & Services Tax

As Goods & Services Tax (GST) regime is set to enter its 9th year of its existence on July 1, the FM gave an insight on the next round of reforms. On rate rationalisation, she said various Groups of Ministers (GoMs) have done their work, but she wants to get into greater details.

“My intention was to undertake a comprehensive exercise, item by item. We want to look at every rate and wherever reduction is possible, we shall bring those rates down. Equally, we are looking at reducing the number of slabs. What will be the final shape, I can’t say but intense work is going on,” she said. 

We need to have more trade agreements, need to open up on very many more sectors, make banks be more amenable for industry and their needs.Nirmala SitharamanFinance Minister

Published on June 30, 2025