Budget 2026: Fiscal Policy Shifts to Debt-Anchored Framework, Market Borrowing Under Scrutiny

• Budget 2026-27 will introduce a structural shift in fiscal policy, moving from a fiscal deficit target to a debt-anchored framework.
• The new framework will focus on keeping the central government's debt-to-GDP ratio within a defined limit, targeting approximately 55.10% by FY2027.
• Primary deficit, rather than fiscal deficit, will become the key metric for market monitoring, with a target of less than 1% of GDP for gradual fiscal consolidation.
• Despite an estimated INR 1.7 lakh crore tax revenue shortfall for FY2026, the government expects to meet its 4.4% fiscal deficit target through RBI dividends and expenditure control.
• Market borrowing for FY2027 is projected to be around INR 16.5 lakh crore gross issuance, with potential reductions through bond switches and T-bills, and a focus on reducing reliance on long-term bonds.

Why It Matters: Budget 2026 signals a major fiscal policy shift to a debt-anchored framework, prioritizing debt-to-GDP ratio and scrutinizing market borrowing.