Fitch Praises India's FY27 Budget: Steady Fiscal Path Balances Growth and Discipline

Fitch Ratings commended India's FY27 budget (Apr 2026-Mar 2027), presented Feb 1, 2026, for upholding macro stability while moderating fiscal consolidation pace. Deficit narrows modestly to 4.3% GDP from 4.4%, prioritizing steady capex at 3.1% GDP over aggressive cuts.

"The budget demonstrates ongoing commitment to gradual debt reduction balanced with robust capex to enhance growth," said Jeremy Zook, Fitch's India Sovereign Analyst. This growth-neutral stance aligns with 6.4% FY27 GDP forecast, as infra spending crowds in private investment amid recovery lags.

Structural strengths shine: strong growth momentum, reform continuity (e.g., GST tweaks), fiscal credibility. Yet, high debt/interest costs vs. peers limit upside; sustained 6.4%+ growth, better spending quality could lift 'BBB-' rating.

Key Highlights

• Fiscal Deficit: 4.3% GDP FY27 (vs. 4.4% FY26 est.); Fitch expected 4.2%.
• ​Capex Stable: 3.1% GDP, offsetting private investment lag.
• ​Growth Outlook: 6.4% FY27 GDP, unchanged; supportive via infra spend.
• ​Debt Target: General govt debt-to-GDP 55.6% FY27.
• ​Reforms Focus: Deregulation to boost private capex, resilience.
• ​Challenges: Elevated deficits/debt vs. peers; gradual decline expected.

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FM Nirmala Sitharaman emphasized manufacturing boosts, AI/infra amid global volatility. Fitch sees capex sustaining near/medium-term prospects.

Sources: Fitch Ratings, Economic Times, Outlook Business, Reuters