New Delhi, Jan 26 India continues to remain the bright spot supported by its strong macro fundamentals and the government capex may cross Rs 12 lakh crore in FY27, a year-on-year growth of 10 per cent, an SBI Research report said on Monday.
The nominal GDP growth relevant for Budget math is expected at 10.5-11 per cent with the uptrend in global commodity prices may percolate in a higher WPI.
A bit slower nominal growth may hurt tax revenues in FY27, requiring better expenditure planning. However, GST rationalisation and reduction in marginal tax rates for personal income tax is expected to cushion the impact of sluggishness in tax base, said Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India.
Based on the above nominal forecast, fiscal deficit is expected to be at 4.2 per cent of GDP for FY27. The cost of borrowing from the government is expected at 6.8-7.0 per cent for FY27 with risk evenly balanced, Ghosh added.
Estimated net Central borrowing for FY27 is expected at Rs 11.7 trillion (around 70 per cent of FD) and repayment of Rs 4.60 trillion including Rs 1 lakh crore expected buyback and Rs 1.5 trillion estimated switches while State gross borrowings may come at Rs 12.6 trillion and repayment of Rs 4.2 trillion.
“There is a possibility of scaling down SDLs and hence net state borrowings through meaningful reforms and net centre borrowings through higher borrowing through T-Bill issuance. With such large borrowings, the Government and the RBI may also have to work together to bring meaningful reforms in the SDL market,” said the report.
The presentation of the Union Budget 2026 comes against the domino effects of a new emerging order of realpolitik, still largely opaque, yet frightening, cascading down the annals of global financial markets with misplaced trust being the lynchpin of rout across stretched equities and bond markets.
The report further said that as states account for a significant share of general government debt, state budgets should explicitly chart medium-term, preferably scenario-based, debt-to-GSDP trajectories, aligned with realistic growth assumptions and development needs, rather than relying solely on annual deficit targets. The Union Budget may highlight this.
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