New Delhi, Jan 23 The next fiscal (FY27) is likely to be a year of fiscal restraint for the upcoming Union Budget 2026-27, after having given a lot of tax breaks in FY26, according to a new report.
As far as expenditure is concerned, at least a 10 per cent capex growth is assumed with limited room for revenue expenditure (as per our base case), according to the Budget Preview from HSBC Mutual Fund.
“In terms of deficit, the commitment to walk the fiscal glide path suggests a fiscal deficit of Rs 16.6 lakh crore (base case) — 4.2 per cent of GDP; translating into debt-to-GDP ratio of 55.6 per cent for FY27 (estimated),” the report projected.
Overall, the deficit targets would be met at 4.4 per cent of GDP even as Nominal GDP ‘growth rate’ is lower, the absolute level is still higher than that laid out at the time of FY26BE, the report said.
As of January, the FY27 redemptions stand at Rs 5.5 lakh crore.
Assuming some buyback/switches/retirement, the redemptions could be brought down to Rs 4.5 lakh crore, still higher than the Rs 3.3 lakh crore in FY26. This in itself takes the Gross Borrowing higher to Rs 16.3 lakh crore (base case), the report mentioned.
The Nominal growth is assumed at 10 per cent YoY and the rise in liabilities is assumed to rise at a slower clip of 8 per cent.
At the same time, the weighted average borrowing cost (as of FY25 was about 7 per cent and till Q2 FY26, it was somewhere in the region of 7.20 per cent, while Nominal GDP growth was just about 8 per cent YoY, which, in some way, makes it challenging to layout a rosy path for fiscal consolidation especially in terms of debt-to-GDP ratio, the report said.
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