**CareEdge Ratings** estimates India’s **gross tax revenue** to grow by **9.6%** in FY27 (2026-27), which is slightly lower than the expected nominal GDP growth of **10.1%**. This reflects better tax buoyancy amid lower FY26 collections (only 3.3% growth vs budgeted 12.5% in FY26). **Direct taxes** (income and corporate) are expected to improve, while **GST** may face pressure from rate rationalization but will show signs of recovery. **Central Excise** will be supported by higher tobacco taxes with effect from February 1, 2026.
**Capital expenditure (capex)** is estimated to grow by **10%** to **Rs 12.3 trillion** in FY27, continuing the investment-led growth strategy (FY26 capex is likely to end at around Rs 11.2 trillion, with a strong growth of 28.2% over April-November 2025). **Fiscal deficit** is expected to be budgeted at **4.2–4.3%** of GDP in FY27 (from ~4.4% in FY26), which will balance consolidation, debt sustainability and growth support. Gross borrowing: **Rs 16–17 trillion**; Net borrowing: **11.5–12 trillion rupees**.
**Non-tax revenues** remain strong, helped by high **RBI dividend** (~Rs 2.7 trillion in FY26; estimated at Rs 2–2.5 trillion in FY27). This could lead to FY26 non-tax revenue being Rs 0.3 trillion higher than the budgeted Rs 5.8 trillion. Non-debt capital receipts may decline by Rs 0.2 trillion in FY26. A separate **smallcase** pre-budget survey (over 50 investment managers, report January 22-23, 2026) matches the capex focus: expectations for higher allocation to the **defense** sector are at the top (~40% of respondents) due to indigenization, modernization, exports and continued spending. **Infrastructure** is in second place (~29%), driven by public capex multipliers in roads, railways and urban projects. The budget (presented on February 1, 2026) is expected to maintain fiscal prudence while giving priority to strategic, growth-oriented sectors.
Overall, estimates point to a sharp increase in taxes, continued capex focus and a cautious fiscal path amid global challenges.
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