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Budget 2026: Investors Eye Debt, Deficit, and Record Borrowing Plans

Investors are closely watching India's upcoming Union Budget 2026-27, with primary focus on government debt metrics, the fiscal deficit target, and the scale of scheduled borrowings. DBS Bank projects net borrowings could rise to ₹12 lakh crore, potentially pushing gross borrowings to a fresh high of ₹16.5 lakh crore. The Economic Survey 2025-26 projects FY27 growth at 6.8-7.2% while highlighting geopolitical risks. Separately, an upcoming revision of the CPI base year will lower the weight of food and beverages in the inflation basket.

Key Points: Budget 2026 Focus: Debt Metrics, Deficit, and Borrowing Outlook

  • Debt metrics under scrutiny
  • Deficit outcome pivotal
  • Borrowings may hit record high
  • CPI revision to lower food weight
3 min read

Budget 2026: Investors to focus on debt metrics, deficit outcome, borrowings

Key investor focus for India's Budget 2026-27 is on debt, fiscal deficit, and expected record high gross borrowings of ₹16.5 lakh crore.

"we expect FY27 net borrowings to rise to Rs 12 lakh crore - Radhika Rao, DBS Bank"

New Delhi, Jan 30

As India gears up to table the Union Budget 2026-27 in Parliament on February 1, investors are likely to be focused on the debt metrics, deficit outcome and scheduled borrowings for the next year Budget to align with strategic objectives, a report showed on Friday.

The size of borrowings will be an important consideration for the bond markets, said a note by DBS Bank.

"Given our underlying math and deficit target, we expect FY27 net borrowings to rise to Rs 12 lakh crore (vs Rs 11.4 lakh crore in FY26), which amounts to 73 per cent of the deficit next year. Assuming redemptions at around Rs 4.5 lakh crore (factoring in potential switches), gross borrowings are likely to rise to a fresh high of Rs 16.5 lakh crore," explained Radhika Rao, Executive Director and Senior Economist at DBS Bank.

The Economic Survey 2025-26 presented a comprehensive assessment of the economy, projecting FY27 growth at 6.8-7.2 per cent from 7.4 per cent this year, higher than street estimates.

Geopolitics and global uncertainty emerged as defining themes of the report, outlining three scenarios of various risk intensity. While these forces pose clear risks to India, the Survey underscored the imperative of strengthening domestic fundamentals to cushion against external shocks - recognising that the global environment may yet deteriorate.

According to the note, gross supply might be lowered in Budget if more switches are planned to push out part of FY27 maturities for longer-out tenors, though this needs to be balanced with the prevailing tepid demand for duration papers.

"The FY28 maturities stand at Rs 6 lakh crore, which might be lowered through switches in the coming year. A significant wall of supply ahead would contribute to further hardening in INR bond yields, with the 10Y at a year's high above 6.7 per cent," said the report.

Separately, the statistics agency published expert group recommendations for the upcoming revision of the CPI base year to 2023-24 from current 2011-12.

First CPI release under the revised and rebased series is due on February 12. The balancing exercise will lower weightage of the food and beverages component (from 45.86 per cent to 36.75 per cent) and reallocate that towards services (ex-education), to align with the change in consumption patterns.

"Based on the new weights and if indices are kept unchanged, the new CPI will have increased slightly by 20-25bp, while the reverse will have held during periods of higher food inflation," said the report.

- IANS

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Reader Comments

P
Priya S
Interesting update on the CPI revision. Reducing the weight of food and beverages makes sense as our consumption patterns evolve, but I hope this doesn't mask the real inflation pinch that middle-class families feel at the grocery store. 🛒 The proof will be in the February 12 data.
R
Rohit P
As a small investor, the rising bond yields are a concern. If the 10-year yield hardens further, it could make loans more expensive for everything from homes to cars. The budget needs to address this liquidity tightness. Fingers crossed for some positive surprises.
S
Sarah B
The report rightly highlights global uncertainty as a major risk. In today's interconnected world, a strong domestic foundation is non-negotiable. I'm cautiously optimistic about the 6.8-7.2% growth projection. Let's see if the budget provides the right policy push to achieve it.
V
Vikram M
While the economic survey sounds good on paper, the real test is execution. We've seen high borrowings before, but the key is where this money is deployed. It should go into infrastructure, manufacturing, and green energy—sectors that create jobs and boost productivity, not just populist schemes.
K
Kavya N
Respectfully, I feel the narrative is too investor-centric. What about the common citizen? High government borrowings can crowd out credit for MSMEs. I hope the budget also focuses on easing the cost of doing business for small entrepreneurs who are the backbone of our economy. 🙏

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