FY27 BUDGET TO FOCUS ON FISCAL CONSOLIDATION, CAPEX

With the Union Budget for FY27 scheduled for Sunday, expectations are tamed even as markets remain alert to the possibility of selective positive surprises, according to a pre-Budget note by Union Bank of India (UBI).

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The report notes that while the Government does not wait for the Budget to announce key reforms, the Budget continues to be a crucial policy document, especially at a time when most major policy announcements are already under execution.

UBI expects fiscal consolidation to continue in FY27, albeit at a slower pace. The fiscal deficit is projected at 4.2-4.4 per cent of GDP, with the bank stating, “We see fiscal consolidation to continue in FY27, albeit at slower pace, to 4.2% of GDP, in order to preserve policy space in an uncertain world & ahead of Pay Commission implementation in FY28.”

The report highlights a likely transition towards a debt-to-GDP targeting framework, noting that the Centre aims to transition to a debt management approach from FY27 with an endeavour to reduce debt to GDP to around 50+-1 per cent by FY31.