New Delhi, Jan 26 (.) The union Budget for 2026–27 will be presented against a backdrop of heightened global uncertainty, fragmented financial markets, rising commodity prices and growing concerns over global debt sustainability, according to the SBI report released here on Monday.
Despite these challenges, India continues to stand out as a zone of relative stability, supported by strong macroeconomic fundamentals and a post-pandemic recovery that has outperformed both its peers and high-income economies.
SBI Research expects nominal GDP growth relevant for Budget calculations to be in the range of 10.5–11 per cent in FY27, partly driven by elevated global commodity prices feeding into wholesale inflation.
On this basis, the fiscal deficit for FY27 is projected at around 4.2 per cent of GDP, lower than the estimated 4.4 per cent in FY26. The report notes that a revision in the GDP series could, however, alter fiscal arithmetic.
Total receipts in FY27 are estimated at Rs 37.7 lakh crore, reflecting modest growth in tax revenues and largely flat non-tax revenues.
Tax revenue is projected to rise to Rs 30.5 lakh crore, while non-tax revenue is expected to grow marginally to Rs 6.4 lakh crore.
On the expenditure side, total spending is estimated at Rs 54.2 lakh crore in FY27, up 7.1 per cent year-on-year.
Government capital expenditure is expected to cross Rs 12 lakh crore in FY27, marking a year-on-year growth of around 10 per cent.
When combined with grants for asset creation and capital spending by central public sector enterprises, total effective capital expenditure could approach nearly Rs 20 lakh crore, maintaining capex at about 5.5 per cent of GDP.
On the borrowing front, net central government borrowing for FY27 is estimated at Rs 11.7 lakh crore, roughly 70 per cent of the fiscal deficit, with repayments of around Rs 4.6 lakh crore. State governments’ gross borrowings are expected to be about Rs 12.6 lakh crore, with repayments of Rs 4.2 lakh crore.
SBI Research indicates that the Reserve Bank of India may need to step up open market operations to manage borrowing pressures, while meaningful reforms in the state development loan market could help reduce net borrowings.
The report highlights that direct taxes now account for nearly 59 per cent of total tax revenue, the highest share in 15 years, with personal income tax collections continuing to outpace corporate tax collections. This trend is expected to persist in the FY27 Budget. Non-tax revenues are projected to remain stable, supported by dividends from the RBI and public sector banks, though market volatility could influence disinvestment outcomes.
SBI Research also underlines the importance of fiscal coordination between the Centre and states. While total transfers to states, including tax devolution and grants, are expected to remain around 54 per cent of the Centre’s gross tax revenue, the report flags continued ambiguity regarding the timing and magnitude of these transfers.
Greater clarity on tax devolution is seen as essential for effective fiscal planning at the state level.
On the medium-term fiscal path, the report notes the government’s commitment to bring central government debt down to about 50 per cent of GDP by FY31, assuming no major external shocks.
Over the next five years, gross market borrowing requirements could total between Rs 93.8 lakh crore and Rs 95.2 lakh crore, underscoring the need to diversify the borrowing base, including greater reliance on small savings.
The report points out that while overall public debt has declined, state government debt remains elevated at over 28 per cent of GDP, well above recommended levels. It suggests that state budgets should explicitly lay out medium-term, scenario-based debt-to-GSDP trajectories aligned with realistic growth assumptions.
In terms of policy suggestions, SBI Research calls for measures to boost household financial savings, including parity in tax treatment of deposit interest with capital gains, a shorter lock-in period for tax-saving fixed deposits, and removal of TDS on savings account interest. On the indirect tax front, it recommends amendments to GST provisions to reduce litigation and exclude banking services from GST TDS.
. SAS .