Budget FY27 Comment by Sakshi Gupta – Principal Economist, HDFC Bank

Lucknow : Admist rising global uncertainties, the budget focusses on laying down a medium-term roadmap for boosting domestic growth and productivity. Unlike the previous budget where a push to consumption was prioritised through income tax rationalisation, this budget shifted attention towards promoting manufacturing and the service sector.

The setting up of a standing committee for the banking system to achieve the Viksit Bharat goal and focus on tourism, health, education and skilling underpin the government’s policy emphasis on increasing the share of Indian service sector in global services to 10%.

On domestic production, infrastructure, along with boost to electronics, semiconductor, rare earth magnets and chemicals found mention in the FM’s Viksit Bharat plan. Moreover, labour intensive tariff hit sectors like textiles and MSMEs were provided greater policy support.

In terms of the fiscal math, the budget remains conservative accounting for 10% nominal GDP growth for FY27, lower than our estimate of 10.5%. On capex target, the government as expected targeted moderate growth of 11.5% in FY27 while banking on attracting private capital. The fiscal math broadly seems credible and prudent, aiming for gentle fiscal consolidation for FY27.

That said, the higher-than-expected gross borrowing of INR 17.2 lakh crore could weigh on market sentiments as demand and supply imbalance has already been weighing on bond yields. We expect the 10-year bond yield to open higher tomorrow.