**Market Brief: Union Budget FY27 & Fiscal Outlook** **Pivot to Debt Anchoring** The Union Budget FY27 marks a structural shift in India's fiscal management, moving from rigid annual deficit targets to a flexible **debt-to-GDP anchor**. This new framework aims to reduce central government debt to approximately **50%** of GDP by FY31, down from **~56.6%** in FY25. The government remains on track to meet its fiscal deficit target of **4.4%** for FY26, with expectations for a further reduction to **4.2–4.3%** in the upcoming FY27 budget. **Revenue Dynamics: Tax Buoyancy vs. Non-Tax Reliance** Fiscal consolidation faces headwinds from compressing tax buoyancy. Gross tax revenue growth decelerated to just **4%** year-on-year in the first eight months of FY26, the weakest performance since FY21. As nominal GDP growth moderates, the government is increasingly relying on non-tax revenues to bridge the gap. "Bumper dividends" from the Reserve Bank of India (RBI) and increased payouts from Public Sector Undertakings (PSUs) are becoming critical fiscal stabilizers, with non-tax revenue growth projected at roughly **13%**. **Expenditure Strategy: Capex Normalization** The era of aggressive, centralized capex expansion is normalizing. After a **26%** CAGR between FY20–25, budgetary capital expenditure growth is moderating. The strategy is shifting toward "effective capex" routed through off-budget channels and state-led initiatives. While on-budget spending slows, off-budget capex by PSUs—particularly in power and energy—has surged, registering **15%** CAGR. The Centre is also leveraging state execution capacities through continued loans and grants, despite emerging signs of fiscal strain at the state level. **Growth & Consumption Context** The Economic Survey 2025-26 projects real GDP growth for FY27 in the range of **6.8–7.2%**, a slight moderation from the **7.4%** estimated for FY26. Domestic private consumption remains the primary growth engine, accounting for **61.5%** of GDP—the highest share since 2012. However, consumption growth is showing signs of plateauing, necessitating the balanced fiscal approach adopted in this budget cycle.