Union Budget 2026: Capex Projected To Grow At 15 Pc, Fiscal Deficit Estimated At 4.2 Pc

The government is likely to table an estimated 53.5 lakh crore expenditure in the upcoming Union Budget 2026. Additionally, the capital expenditure (capex) is also likely to rise by 15 per cent, while fiscal deficit is projected at about 4.2 per cent of GDP.

Investment management firm OmniScience Capital said on Thursday that tax revenue is likely to rise by 10 per cent on year-on year in FY 2027 on a nominal GDP growth assumption of around 9 per cent.

Non-tax revenue is also projected to grow at 10 per cent, reflecting normalised dividends payouts and the profitablity of central public sector enterprise (CPSE), without including additional projection by RBI, the report said.

Government borrowings are likely to see a normal increase projected at 3 per cent on Y-o-Y. This shift signals that in FY27 fiscal deficit is estimated to lie between 4.1 and 4.2, aligning with the central government policy to reduce deficit.

The report highlights the transformation of the Union Budget over the past decade, with capex rising from 20 per cent in the 2016 Union Budget to 30.6 per cent in the Union Budget 2026.

Government More Focused On Creating Long-Term Assets

This successive growth in capex showcases the government’s focus on creating long-term assets and future economic growth, it noted. Over the past ten years, the capex has risen with an average of 15 per cent on y-o-y, while revenue expenditure growth has been at 8.8 per cent.

This reflects that the government is more focused on infrastructure development, productivity enhancement and attracting private investment, rather than simply increasing expenditure, the report said.

Estimated capex includes grants for capital assets and assistance to states. Total public capex in FY27 is roughly estimated at 17 lakh crore, reinforcing the infrastructure-led development strategy.

Budgetary allocations for defence and core infrastructure will be a fiscal priority, the report said. However, focus on technology, energy and urban development is expected to rise timely.
The report also said that interest payment is still a big challenge for the government, limiting the flexibility in expenditure.

Also Read: Budget 2026 Signals Higher Tax Revenue & Stronger Capital Spending Push