A Sunidhi Securities report projects the FY2026-27 Union Budget at Rs 54.1 lakh crore, a 7.9% YoY increase. The fiscal deficit target is estimated at 4.16% of GDP, indicating a path of calibrated fiscal consolidation.
Union Finance Minister Nirmala Sitharaman is expected to present a Rs 54.1 lakh crore Union Budget for FY2026-27, registering a year-on-year growth of 7.9 per cent, according to a report by Sunidhi Securities & Finance Limited.
Expenditure and Fiscal Consolidation Path
The report highlighted that the size of the Union Budget, measured by Total Expenditure (TE) as a percentage of GDP, is the clearest indicator of the government's fiscal intent. After averaging 14.8 per cent of GDP during FY23-FY25, Total Expenditure was budgeted at 14.2 per cent of GDP, or Rs 50.65 lakh crore, in the Budget Estimates (BE) for FY26. However, factoring in weaker nominal GDP growth and lower revenue buoyancy, the report estimated Revised Estimates (RE) for FY26 Total Expenditure at around 14.0 per cent of GDP, or Rs 50.15 lakh crore.
It stated "For FY27, we estimate TE at Rs 54.1 tln, implying 7.9 per cent YoY growth, consistent with a calibrated fiscal consolidation path rather than fiscal tightening". It further projected a moderation in expenditure to about 13.8 per cent of GDP in FY27, reflecting a gradual consolidation in fiscal policy. According to the report, this trajectory is consistent with a calibrated fiscal consolidation path rather than fiscal tightening, underscoring the government's commitment to maintaining macroeconomic stability without significantly affecting growth support.
Fiscal Deficit Projections
On the fiscal deficit front, the report projected the FY27 fiscal deficit target at 4.16 per cent of GDP, amounting to Rs 16.37 lakh crore, compared to 4.4 per cent of GDP, or Rs 15.69 lakh crore, in BE FY26. While the deficit is expected to rise in absolute terms, its decline as a share of GDP indicates continued progress towards fiscal consolidation.
Economic Momentum and Challenges
The report noted that India enters the Union Budget 2026-27 phase with strong real economic momentum. FY26 real GDP growth is estimated at 7.4 per cent by the Central Statistical Office, reaffirming the resilience of the underlying economy. It also pointed out that GST reforms implemented in September last year have emerged as a structural inflection point, leading to a sharp recovery in urban demand and an improvement in growth momentum during the second half of FY26.
However, this strength in real economic activity stands in contrast to the slowest nominal GDP growth in nearly six years, estimated at around 8 per cent, reflecting strong disinflationary forces. The subdued nominal growth impacted tax buoyancy and overall revenue collections, resulting in lower devolution of Union taxes and duties to states, the report added.
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