The government is likely to peg fiscal deficit at 4.3 per cent of GDP for the next financial year beginning April 2026 and a double-digit growth in capital expenditure, ICRA said in its pre-Budget expectation on Friday.
ICRA expects a Rs 1.3 lakh crore shortfall in net tax revenues in the current fiscal and non-tax receipts to surpass the 2025-26 Budget target by Rs 80,000 crore.
"Fiscal slippage unlikely in FY2026, if shortfall in receipts is matched by expenditure savings," it said.
In its pre-Budget expectations, ICRA said the FY2027 Union Budget is set to be an interesting one, with the government's focus shifting to medium-term debt consolidation from annual fiscal deficit targets, as well as the implementation of the 16th Finance Commission recommendations for the next five years.
ICRA believes that the government's fiscal deficit is likely to be capped at 4.3 per cent of the GDP in FY2027 (nominal GDP growth estimated at 9.8 per cent), marginally lower than the Budget Estimate (BE) of 4.4 per cent for FY2026.
It expects GoI to push up capital expenditure by 14 per cent to Rs 13.1 lakh crore in FY'27 before fiscal rigidities in the form of higher committed expenditure set in from FY2028 on account of the 8th Central Pay Commission (CPC) recommendations on salary/pension revisions for Central Government employees/pensioners.
Despite a mild dip in the fiscal deficit-to-GDP ratio, ICRA expects gross dated market issuances to rise sharply by 15-16 per cent to Rs 16.9 lakh crore, led by a surge in redemptions, although this may be tempered by switching of G-secs.
Watch LIVE TV, Get Stock Market Updates, Top Business, IPO and Latest News on NDTV Profit.
