New Delhi, Jan 28 (.) India’s union Budget for 2026–27 is expected to strike a careful balance between fiscal consolidation and growth support, as heightened global uncertainty, volatile financial markets and rising commodity prices weigh on economic outlooks, according to a research report by State Bank of India (SBI).
SBI Research projects nominal GDP growth of around 10.5–11% for FY27, factoring in the potential spillover of higher global commodity prices into wholesale inflation.
Based on this assumption, the fiscal deficit is expected to be budgeted at about 4.2% of GDP, continuing the government’s medium-term path of fiscal consolidation.
The report estimates net central government borrowing at Rs 11.7 lakh crore in FY27, with gross borrowing of Rs 16.3 lakh crore and repayments of about Rs 4.6 lakh crore.
State governments’ gross borrowings are projected at Rs 12.6 lakh crore, underscoring the growing need for coordination between the Centre and states on debt management and market borrowings.
Capital expenditure is expected to remain a key pillar of growth, with government capex likely to cross Rs 12 lakh crore in FY27, marking an annual increase of around 10%.
SBI notes that sustained public investment will be critical in supporting medium-term growth amid global headwinds.
On the revenue front, the contribution of direct taxes to total tax revenue is projected to remain high, with personal income tax collections continuing to outpace corporate tax receipts.
Non-tax revenue growth, however, may remain modest and sensitive to market conditions, particularly in the context of disinvestment and dividend receipts from public sector entities.
The report also flags the rising importance of state finances, noting that while overall public debt levels have moderated from pandemic peaks, state debt remains above recommended thresholds.
SBI suggests that future budgets may emphasise clearer, scenario-based debt-to-GSDP trajectories for states to ensure long-term fiscal sustainability.
SBI Research describes India as an “ocean of certainty” in an increasingly fragmented global economy, with the FY27 Budget likely to reinforce macroeconomic stability while pushing incremental reforms across taxation, financial savings, insurance and pension sectors.
. VK .