India is likely to meet its FY26 fiscal deficit target of Rs 15.79 lakh crore, maintaining fiscal discipline
New Delhi
India’s tax collections are expected to rise strongly in the coming years, helping the government continue its fiscal consolidation plans, according to a new report released on Wednesday. The report by HDFC Bank said gross tax buoyancy may increase to 1.1 in FY27 from a projected 0.64 in FY26, indicating faster tax growth than the overall economy.
The report estimates nominal GDP growth of about 10.1 percent in FY27, compared to an expected 8.5 percent in FY26. Higher economic activity is likely to support stronger tax revenues. Government capital spending is projected to rise by 10.5 percent to around Rs 11.5 to Rs 12 lakh crore, while revenue expenditure may increase by 9.5 percent to nearly Rs 41.9 lakh crore.
India is also expected to meet its fiscal deficit target for FY26. The deficit is estimated at Rs 15.79 lakh crore, close to the budgeted figure of Rs 15.69 lakh crore, or 4.4 percent of GDP. Fiscal discipline is likely to continue in the Union Budget 2026–27, with the deficit target expected to narrow further to 4.2 percent in FY27.
The report projected a decline in the debt to GDP ratio to 55.1 percent in FY27 from 56.1 percent in FY26. Higher government bond supply may keep yields elevated, though RBI support and foreign investments could help stabilise markets.
Separately, policy experts urged tax reforms, wider tax base use of technology, GST expansion, and steps to curb the parallel economy. These measures could strengthen long term growth and improve overall tax efficiency across sectors nationwide.
