India’s gross tax revenue is projected to improve in FY27, rising by 9.6%, slightly below the projected nominal GDP growth of 10.1%, according to a report by CareEdge Ratings. Direct tax collections are also anticipated to see some enhancement in FY27, supported by the recovery in income and corporate tax collections.
The government’s capital expenditure (capex) is forecasted to increase by 10% to Rs 12.3 trillion in FY27, while the fiscal deficit is expected to be budgeted at 4.2–4.3% in the same fiscal year. The report suggests that gross borrowing is likely to range between Rs 16-17 trillion in FY27, with net borrowing estimated at Rs 11.5-12 trillion.
Despite the anticipated impact of GST rate rationalization on collections, GST revenues are predicted to exhibit signs of improvement. Non-tax collections have shown strength this fiscal year, driven by a higher Reserve Bank of India dividend, with non-tax revenues up by 20.9% during the initial eight months of FY26.
The report also mentions that the RBI dividend transfer is expected to remain substantial at Rs 2–Rs 2.5 trillion in FY27, compared to Rs 2.7 trillion in FY26. Additionally, non-debt capital receipts may fall short by Rs 0.2 trillion in FY26, as per the firm’s forecast. Excise duty on tobacco products, effective February 1, 2026, is anticipated to bolster union excise duty growth in FY27.
Another recent report highlighted that Budget 2026 will uphold fiscal prudence and prioritize strategic, capex-heavy sectors, with the defense sector being the primary beneficiary. A pre-budget survey involving over 50 investment managers revealed that infrastructure ranked second at approximately 29%, indicating confidence in public capex and long-term growth multipliers.
