New Delhi, Jan 16 || The central government's fiscal deficit is expected to be set at 4.2 per cent of GDP for FY27 in the upcoming Union Budget (against the target of 4.4 per cent in FY26) — corresponding to moderation in debt to 55.1 per cent of GDP, a Morgan Stanley report said on Friday.
The pace of consolidation will be consistent with central government debt reduction to 55.1 per cent of GDP from 56.1 per cent in FY26.
“A pickup in nominal growth will help to lift tax buoyancy and improve tax collections in FY2027, helping the government to prioritise capex and social infrastructure-related spending alongside gradual consolidation,” the report mentioned.
Focus on capex to help create jobs, targeted social sector spending, and a step up in structural reform momentum are likely to be key themes, it added.
The impact of the budget on the market has been on a secular decline, albeit actual performance is a function of pre-budget expectations (as measured by market performance ahead of the budget).