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Buoyant Revenues to Sustain Capex, Drive Fiscal Consolidation: ICICI Report

A pre-Budget report by ICICI Bank Global Markets states that a buoyant revenue collection outlook for 2026-27 provides the government room to maintain capital expenditure at about 3.1% of GDP. It suggests the upcoming Union Budget should focus on Ease of Doing Business, deregulation, and incentives to crowd in private investment. The report expects a fiscal deficit target of 4.2% of GDP for the 2026-27 financial year. It notes that the previous year's stimulus measures affected tax collections, potentially requiring spending adjustments to meet the 4.4% deficit target for 2025-26.

Key Points: ICICI Report: Strong Revenues to Support Govt Capex, Fiscal Goals

  • Buoyant revenue outlook for FY27
  • Capex steady at 3.1% of GDP
  • Fiscal deficit target of 4.2%
  • Budget focus on Ease of Doing Business
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Buoyant revenues give room to sustain govt capex, push fiscal consolidation: ICICI Bank report

ICICI Bank report says buoyant revenues allow steady 3.1% GDP capex while pursuing fiscal consolidation, targeting a 4.2% deficit in FY27.

"This gives government room to keep capex at 3.1% of GDP while continuing on the path of consolidation. - ICICI Bank Report"

New Delhi, January 25

Buoyant revenue streams give the government room to keep capital expenditure spending steady, at about 3.1 per cent of GDP, while continuing on the path of fiscal consolidation, according to a pre-Budget report by ICICI Bank Global Markets.

2025-26 was driven by both fiscal and monetary stimulus amid mounting external headwinds.

On the fiscal front, both income and GST stimulus totalled 0.9 per cent of GDP, as per the report. This has affected tax collections even as private demand has picked up. Hence, to achieve a fiscal deficit of 4.4 per cent in 2025-26, a cutback in spending may be needed to meet the fiscal target, it has asserted.

On a low base and rising demand, the revenue collection outlook for 2026-27 is much more buoyant, with non-tax revenues expected to remain elevated.

"This gives government room to keep capex at 3.1% of GDP while continuing on the path of consolidation," the report read. A capex expenditure worth Rs 11.21 lakh crore (or 3.1 per cent of GDP) was earmarked in 2025-26 Union Budget, rising year-on-year.

Against that backdrop, it suggested that the focus of the Union Budget should be on Ease of Doing Business and Deregulation (aligning customs), along with incentives to crowd in private investment, particularly manufacturing.

"FY27 Union Budget is likely to act an enabler to capitalise on stimulus given by focusing on increasing investments in the economy. For the same, we expect theme of the Budget to be Ease of Doing Business, promoting foreign inflows, deregulation and rationalisating custom duties and processes," it read.

In 2026-27, it expects a fiscal deficit target of 4.2 per cent of GDP.

As has been the convention, the Union Budget for 2026-27 will be presented in the Parliament on February 1, 2026.

- ANI

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Reader Comments

S
Sarah B
As a small business owner, the emphasis on 'Ease of Doing Business' is crucial. The GST process, while improved, still needs simplification. Lowering compliance burdens will directly help MSMEs grow and create jobs.
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Priyanka N
Fiscal consolidation is important, but not at the cost of social sector spending. I respectfully hope the budget doesn't cut back on essential schemes for health and education while chasing the 4.2% deficit target. A balanced approach is needed.
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Aman W
Manufacturing incentives and rationalising customs duties can be a game-changer for 'Make in India'. Need to become a global export hub, not just serve the domestic market. Let's see if the budget delivers on this promise.
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Karthik V
The report mentions "crowding in private investment". This is key. Government capex should act as a catalyst, not a substitute. Stable policies and tax regimes will give private players the confidence to invest big.
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Michael C
Interesting analysis. The projected revenue buoyancy for FY27 seems optimistic given global uncertainties. Hope the planning is prudent and includes buffers for external shocks. Fiscal discipline is good, but flexibility is also important.

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