Budget 2026: Debt Anchor Holds Firm as Fiscal Glide Path Extends

Market snapshot: In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman has cemented the shift in fiscal policy anchoring from annual deficit targets to a medium-term debt-to-GDP trajectory. The central government projects a debt-to-GDP ratio of 55.6% for FY27, a measurable improvement from the revised 56.1% in FY26.

Summary: India targets 55.6% Debt-to-GDP for FY27 (vs 56.1% FY26) with a fiscal deficit goal of 4.3%. The focus shifts decisively to debt sustainability, aiming for <50% by FY31.

Key Takeaways

• Fiscal Deficit target set at 4.3% for FY27, continuing the consolidation trend.
• Debt-to-GDP ratio projected to fall to 55.6% (FY27) from 56.1% (FY26 RE).
• Capital Expenditure increased by 11.5% to ₹12.2 lakh crore to sustain growth.
• Sovereign rating support reinforced following the S&P upgrade to BBB in Aug 2025.

SAHI Perspective

The formal pivoting to a debt-to-GDP anchor (aiming for <50% by FY31) is a structural positive for Indian bond markets. With the S&P upgrade to 'BBB' in August 2025 already pricing in fiscal discipline, this budget avoids populist expansion despite the upcoming electoral cycles. Expect yield curves to steepen slightly as the market digests the ₹12.2 lakh crore capex plan against a backdrop of reducing borrowing requirements relative to GDP.

Closing Insight

Budget 2026 is less about fireworks and more about foundational strength. By prioritizing the debt anchor, New Delhi is signaling long-term stability to global pension funds and sovereign desks.

High Performance Trading with SAHI.