Budget 202627 Likely To Avoid Tax Changes, Focus On Capex-Led Growth: DBS

(MENAFN- KNN India) New Delhi, Jan 23 (KNN) India's Union Budget 2026–27 is expected to keep taxes largely unchanged while reinforcing capital expenditure as the main driver of growth in FY27, a DBS Group report said.

Radhika Rao, Senior Economist at DBS, said policymakers are likely to focus on execution over fresh allocations, with capex estimated at 3–3.1 percent of GDP, reinforcing infrastructure-led growth. The report added that emphasis will be on shovel-ready and greenfield projects, along with concessional support for state-level capex to sustain public investment.

Fiscal Discipline and Revenue Outlook

DBS said India's post-pandemic fiscal position has strengthened, with the central deficit halving and earning a sovereign outlook upgrade in 2025. Despite a likely Rs 1.1–1.2 trillion revenue shortfall in FY26, the report expects deficit targets to be met through spending rationalisation, moderated capex and restrained revenue expenditure growth.

DBS said the FY27 Budget will anchor fiscal policy to the debt-to-GDP ratio, with the Centre targeting a reduction to about 50 percent by FY31 from 56 percent in FY26, underscoring a long-term approach to fiscal sustainability.

On the revenue front, the report expects no major tax changes, with gradual gains in tax buoyancy driven by stronger nominal GDP growth. Non-tax revenues may rise on higher RBI and PSU dividends, while divestment targets are likely to stay modest.

Strategic Alignment Beyond Fiscal Math

Beyond fiscal numbers, the Budget is expected to reflect India's strategic priorities, manufacturing, infrastructure, defence, and social welfare, while factoring in a crowded state election calendar.

The report concludes that the FY27 Budget is expected to balance fiscal discipline with growth, avoiding major tax surprises, sustaining capex momentum, and reinforcing long-term economic priorities.

(KNN Bureau)

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