India is expected to remain a global bright spot as government capital expenditure may cross Rs 12 lakh crore in FY27, marking 10 per cent annual growth, according to an SBI Research report. Fiscal deficit is projected at 4.2 per cent of GDP amid stable macro fundamentals
Representational Image
India continues to remain the bright spot supported by its strong macro fundamentals, and the government capex may cross Rs 12 lakh crore in Financial Year (FY) 2027. If the capital expenditure crosses the Rs 12-lakh crore mark, it will be a 10 per cent year-on-year growth, an SBI Research report said on Monday, according to the IANS.
The nominal GDP growth relevant for budget math is expected to be around 10.5 to 11 percent, with the uptrend in global commodity prices possibly percolating in a higher WPI.
Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor of the State Bank of India, said that “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,” the IANS reported.
Fiscal deficit to be at 4.2 percent of GDP
Based on the above nominal forecast, the fiscal deficit is expected to be at 4.2 percent of GDP for FY27. Whereas, the cost of borrowing from the government is expected to be around 6.8-7.0 percent for FY27 with risk evenly balanced, Ghosh added.
Central Government’s borrowing for FY27 is expected to be Rs 11.7 trillion
Estimated net central borrowing for FY27 is expected at Rs 11.7 trillion (around 70 percent 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.
The report further stated, “There is a possibility of scaling down SDLs and hence net state borrowings through meaningful reforms and net center 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,” as per IANS.
The presentation of the Union Budget 2026 comes against the domino effects of a new emerging order of global turmoil that has been cascading down the workflow of the global financial markets.
The report further said that the Union Budget this year may also highlight that states should account for a significant share of general government debt. Also, the 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.
(With inputs from IANS)
Subscribe today by clicking the link and stay updated with the latest news!" Click here!
