New Delhi, Jan 28 (NationPress) The government's capital expenditure (capex) is anticipated to exceed Rs 12 lakh crore in the upcoming Union Budget for 2026-27, reflecting an approximate 10% increase compared to the previous financial year, as indicated by a recent SBI report released on Wednesday.

This increase will facilitate enhanced investments in major infrastructure projects across highways, railways, ports, and power sectors, aimed at stimulating growth and job creation within the economy.

The FY27 budget is being prepared amidst a global economic landscape fraught with uncertainty and fragmentation, making it crucial for India to adhere to fiscal prudence as global debt looms. Notably, the recovery trajectory for India post-pandemic is outpacing that of the post-global financial crisis, as per the report.

It predicts a modest increase in tax revenues alongside stable non-tax revenue for FY27. The nominal GDP growth essential for budget calculations is projected to be around 10.5% to 11%, influenced by rising international commodity prices, potentially impacting WPI inflation. Consequently, the fiscal deficit is expected to hover around 4.2% of GDP for FY27, although adjustments may arise from the new GDP series, the report elaborates.

Borrowing projections may yield a positive surprise, with net Central borrowing for FY27 estimated at Rs 11.7 trillion and repayments at Rs 4.87 trillion. State gross borrowings might reach Rs 12.6 trillion with repayments of Rs 4.2 trillion. The Reserve Bank of India will likely need to enhance open market operations to meet these borrowing needs, according to the SBI report.

The report also advocates for the Budget to incorporate strategies that enhance financial savings in the economy. Suggestions include aligning tax treatment for interest on deposits with long-term capital gains (LTCG) and short-term capital gains (STCG), reducing the lock-in period for tax-saving fixed deposits to three years, and raising the interest threshold for TDS on bank deposits.

In terms of indirect taxes, it proposes clarifying the definition of input service distributor to mitigate litigation and suggests that GST on TDS should not apply to banking services.

Additionally, the necessity for extensive reforms in the insurance and pensions sector to bolster penetration is emphasized.

The report underscores that, given the significant share of general government debt held by states, state budgets should explicitly outline medium-term, scenario-based debt-to-GSDP trajectories that align with realistic growth assumptions and developmental requirements, rather than depending solely on annual deficit targets. This recommendation may feature prominently in the Union Budget, the report concludes.