Credible fiscal arithmetic with sufficient cushion

THE CORE OF FY27 Budget proposals is a nominal GDP growth assumption of 10.0% in FY27.

- DK PANT

Revenue assessment revolves around the GDP growth assumption.The assumed nominal GDP growth could be achieved by a combination of real GDP and deflator growth. The economic 2025-2026 estimated real GDP growth for FY27 is to be 6.8%-7.2%, with 3% GDP deflator growth, 10% nominal GDP growth is plausible at midpoint of the economic survey’s assessment of real GDP growth. The Budget proposed gross tax revenue (GTR) in FY27 (BE) growing 8.0% over FY26 (RE), implying a GTR buoyancy of 0.8x (FY26 (RE): 0.92x). While the assumed buoyancies of income tax (IT) and union excise duty (UED) in FY27 (BE) are higher than FY26, the same for corporation tax (CT), custom duty (CUST), and goods and service tax (GST) are lower.

IT buoyancy in FY26 was impacted due to income tax relief provided in the FY26 budget, leading to higher buoyancy in FY27.