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The note highlights that India’s fiscal strategy has undergone a clear and deliberate shift over the past decade, with the expenditure mix increasingly oriented towards capital-led growth. The FY27 Budget reinforces this trajectory, reflecting the government’s conviction that durable growth, private investment crowding-in, and macroeconomic stability are best achieved through sustained public capital formation rather than short-term fiscal stimulus. As a result, capex and grants now account for over 32% of the total budget in FY27 (BE), up from around 21–22% in FY16.

Nominal GDP for FY27 is projected to grow by 10.1%, with the economy estimated at ?393 lakh crore, while the fiscal deficit target has been set at 4.3% of GDP, underscoring continued commitment to fiscal consolidation alongside growth support. The note highlights that the government’s focus has increasingly shifted towards debt sustainability, with the debt-to-GDP ratio expected to decline from 56.1% in FY26 to 55.6% in FY27 and targeted to glide towards ~50% by FY31.

On the expenditure side, capital expenditure remains the central policy lever. Direct capex is budgeted at ?12.2 lakh crore in FY27, reflecting 11.5% YoY growth, while total public capex including grants rises to ?17.14 lakh crore, a 22.1% increase over FY26 (RE). This places overall capex at ~4.4% of GDP, reinforcing the infrastructure-led growth framework.

Sector-wise, the report highlights continued prioritisation on key growth vectors- Defence, Railways, and Road Transport, which together account for ~67.6% of total budgeted capex.

Defence allocations rose sharply despite strong execution in FY26, underscoring the sustained focus on modernisation and indigenisation. Railways and roads also recorded healthy growth on a high base, reflecting emphasis on network expansion, logistics efficiency, and capacity augmentation.

Beyond core infrastructure, policy support remains strong for electronics, energy transition, and financial markets, with initiatives such as the India Semiconductor Mission 2.0, enhanced incentives for electronics components manufacturing, targeted measures to deepen bond markets, and renewed thrust on decarbonisation and clean energy supply chains.

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