Union Budget 2026: Fiscal Deficit, Taxation, GST and Other Key Indicators to Watch

As the Union Budget for FY27 approaches, investor attention is centred on the government’s fiscal priorities and macroeconomic assumptions. 

Beyond headline announcements, markets will closely analyse deficit targets, capital spending plans, borrowing levels and revenue estimates. 

These indicators will shape expectations for growth, inflation, bond yields and sector-specific opportunities in the coming financial year.

Fiscal Deficit

The fiscal deficit for FY26 has been budgeted at 4.4% of GDP, reflecting continued fiscal consolidation. Markets will watch for guidance on FY27, with expectations of a further reduction towards the 4% mark.

Capital Expenditure

Capital expenditure for FY26 stands at ₹11.2 lakh crore. The upcoming Budget may indicate an increase of around 10–15%, signalling the government’s intent to sustain infrastructure-led growth amid cautious private investment.

Debt Roadmap

The government has outlined plans to steadily reduce the debt-to-GDP ratio from FY27 onwards. Investors will look for clarity on the timeline and measures to move towards the 60% benchmark, given current elevated debt levels.

Borrowing Programme

The Centre’s gross market borrowing for FY26 is pegged at ₹14.80 lakh crore. This figure will be monitored closely, as it has implications for bond yields, liquidity conditions and overall fiscal discipline.

Tax Revenue

Gross tax revenue for FY26 is estimated at ₹42.7 lakh crore, reflecting year-on-year growth of around 11%. This includes ₹25.2 lakh crore from direct taxes and ₹17.5 lakh crore from indirect taxes, both key to funding expenditure plans.

GST Collections

GST collections are projected at ₹11.78 lakh crore for FY26, up 11% year-on-year. Estimates for FY27 will be important, particularly in light of recent rate adjustments aimed at supporting consumption and compliance.

Nominal GDP Growth

Nominal GDP growth for FY26 was revised lower to about 8% due to softer inflation. For FY27, projections in the range of 10.5–11% will provide insight into the government’s growth and inflation assumptions.

Inflation Outlook

CPI inflation moderated in FY26, supported by easing food and fuel prices. For FY27, expectations are that inflation may move closer to the RBI’s target, influencing both fiscal planning and monetary policy expectations.

Spending Priorities

Allocations towards infrastructure, social welfare, health and education will remain in focus. Markets will assess how spending priorities balance growth objectives with fiscal prudence.

Read More: Nirmala Sitharaman To Present Union Budget 2026 at 11 AM On Sunday, February 1, 2026.

Conclusion

The Union Budget 2026 is expected to offer important signals on fiscal strategy, growth assumptions and policy direction for FY27. While headline numbers will set the tone, detailed estimates across deficit, spending and revenue will guide market expectations in the period ahead.

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