The fiscal deficit is estimated at 4.2% of GDP for FY27, while the government’s borrowing cost is expected to be 6.8-7%. Capital expenditure is projected to exceed ₹12 lakh crore in FY27, recording a growth rate of 10% year-on-year.
The report cautioned that slightly slower nominal growth could weigh on tax revenues in FY27, necessitating better expenditure planning. However, GST rationalisation and a reduction in marginal tax rates for personal income-tax are expected to partially offset the impact of a slower expansion in the tax base.
SBI noted that the new GDP series with the base year 2022-23, set to be released on 27 February, could affect the fiscal math.
According to SBI Research, the trend of personal income-tax collections surpassing corporate tax collections is likely to continue in the FY27 Budget. The report estimates gross market borrowing over the next five fiscal years at ₹93.8-95.2 lakh crore, underscoring the need for borrowings from other sources such as small savings.
The central government has outlined a clear medium-term fiscal consolidation roadmap, with its debt-to-GDP ratio projected to decline to 56.1% in FY26 from 57.1% in FY25. It has also committed to placing central government debt on a declining trajectory towards around 50% (± 1%) of GDP by March 2031, barring major external shocks.
Highlighting the significant contribution of states to overall public debt, the report recommended that state governments adopt medium-term – and preferably scenario-based – debt-to-GSDP paths aligned with realistic growth assumptions and development needs, rather than focusing solely on annual deficit targets.