India's FY27 Budget Targets Growth, Fiscal Prudence

India's Finance Minister Nirmala Sitharaman unveiled the Union Budget for the fiscal year 2026-27 on Sunday, February 1, 2026, outlining a strategic blueprint focused on sustained economic growth and fiscal consolidation. The budget estimates the fiscal deficit at 4.3% of GDP, continuing a path of fiscal prudence, as reported by cleartax.

A significant highlight of the budget is the proposed hike in public capital expenditure to an unprecedented ₹12.2 lakh crore for FY27, representing an 11.5% increase over the previous year's revised estimates, according to PRS India. This substantial investment aims to bolster infrastructure development and stimulate job creation across the nation.

The budget prioritizes key sectors including public investment, manufacturing, and support for Micro, Small, and Medium Enterprises (MSMEs), alongside agriculture and ongoing fiscal consolidation efforts. These measures are designed to drive India's economic momentum and achieve the vision of "Viksit Bharat" by 2047, as noted by Upstox.

Finance Minister Sitharaman, in her ninth consecutive budget presentation, emphasized the government's commitment to strengthening domestic manufacturing capabilities and reducing import dependencies. This includes initiatives like Biopharma Shakti and a new phase of the Semiconductor Mission, Live Law reported on February 1, 2026.

The government projects India's nominal GDP to grow by 10% in FY 2026-27, reflecting strong economic momentum driven by robust domestic demand and investment, according to ET CFO. This projection underpins the budget's ambitious expenditure and revenue targets.

Fiscal consolidation remains a core tenet, with the government aiming to reduce the debt-to-GDP ratio to 55.6% in FY27 from 56.1% in the revised estimates for FY26, as detailed by PIB. This steady approach balances growth imperatives with responsible financial management.

• Sustained Fiscal Consolidation Path: The Union Budget for FY 2026-27 reinforces the government's commitment to fiscal discipline, targeting a fiscal deficit of 4.3% of GDP. This marks a further improvement from the 4.4% estimated for FY26, continuing the trajectory of debt consolidation, cleartax reported on February 1, 2026. The Economic Times noted that this pace of consolidation is "somewhat gentler" than anticipated, aiming to reduce the debt-to-GDP ratio to 55.6%.

• Record Capital Expenditure Boost: Public capital expenditure is set to reach a record ₹12.2 lakh crore for FY27, an 11.5% increase over the previous year's revised estimates, according to PRS India. This significant outlay is a cornerstone of the government's infrastructure-led growth strategy, with substantial allocations for Railways (₹2.8 lakh crore) and Roads and Highways (₹2.9 lakh crore), as highlighted by Steady Budget.

• Focus on Manufacturing and Industrial Growth: The budget places a strong emphasis on scaling up manufacturing, with interventions in strategic and frontier sectors. This includes the launch of Biopharma Shakti with a ₹10,000 crore outlay to develop India as a global biopharma hub and the India Semiconductor Mission 2.0 to fortify supply chains and promote industry-led research, Live Law reported. A scheme for Container Manufacturing with a ₹10,000 crore allocation over five years was also proposed.

• Comprehensive MSME Support: Micro, Small, and Medium Enterprises (MSMEs) received a three-pronged support plan focusing on equity, liquidity, and professional assistance. A dedicated ₹10,000 crore SME Growth Fund was proposed, alongside an additional ₹2,000 crore for the Self-Reliant India Fund, as reported by The Economic Times on February 2, 2026. The budget also aims to ease compliance costs and simplify TDS rules for MSMEs.

• Economic Growth Projections: India's nominal GDP is projected to grow by 10% in FY 2026-27, driven by strong domestic demand and investment, according to ET CFO. The Economic Survey, presented on January 29, 2026, forecasted real GDP growth between 6.8% and 7.2% for the same period, indicating a resilient economy despite global headwinds, Business Recorder stated.

• Strategic Infrastructure Development: Beyond traditional infrastructure, the budget proposes new Dedicated Freight Corridors connecting key industrial regions and the operationalization of 20 new National Waterways over the next five years, starting with NW-5 in Odisha, pib reported. An Infrastructure Risk Guarantee Fund will also be established to boost private developer confidence and sustain long-term investment momentum.

• Social and Sectoral Initiatives: The budget includes allocations for the agriculture sector, with a total of ₹1,62,671 crore for agriculture and allied activities, a 7.12% increase from the previous year, ndtv reported. Furthermore, initiatives to promote Ayurveda, develop Buddhist Circuits in the Northeast, and support rare earth corridors in mineral-rich states like Odisha and Kerala were announced, according to The Hindu.