India Budget FY27 to stay focused on fiscal discipline, modest spending push, says Emkay research
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India’s upcoming Union Budget for FY27 is expected to focus on steady fiscal consolidation amid a mixed economic environment, according to a budget preview report by Emkay Research.
The report notes that the Budget comes at a time when private investment remains weak and global uncertainty is rising. “A mixed macro picture, missing vigor in private capex, global noises, and volatility in risk assets form the backdrop of the FY27 Budget,” it said.
Fiscal deficit target and debt focus
The government is likely to continue reducing its fiscal deficit, though at a slower pace. Emkay expects the Centre to target a fiscal deficit of 4.3% of GDP in FY27. “With the shift toward debt/GDP as a fiscal anchor, FY27 GFD/GDP will be targeted at 4.3%,” the report said.
A key change will be the focus on debt as the main fiscal guide. The report said the Centre aims to bring down its debt level over the medium term. “The Centre’s debt/GDP will be the new anchor, with an aim to reduce debt to 50% by FY31, from 56% of GDP in FY26,” it added.
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Taxes, spending and borrowing outlook
On taxes, the report does not expect major relief for individuals or companies. “We do not expect any major tinkering with direct and indirect taxes,” it said. Gross tax revenue growth is likely to be modest at around 8.2%, with tax collections staying below 11% of GDP.
Government spending on infrastructure is expected to remain stable but not see a big jump. “Capex/GDP is unlikely to cross 3%,” the report said, adding that spending will focus on areas such as defence, roads, MSMEs, and new-age sectors.
The report also highlighted that borrowing needs will ease slightly next year. “Net borrowing (Rs11.5trn) will be lower than in FY25,” it said, while small savings are expected to fund around 20% of the fiscal deficit.
Overall, the report said the government will try to balance growth needs with fiscal discipline. “The consolidation will continue, albeit at a mild pace,” it noted, while policy focus is likely to remain on productivity, deregulation, and ease of doing business.