Budget 2026: Govt raises FY27 capex target to ₹12.12 lakh crore, pegs fiscal deficit at 4.3%

Finance Minister Nirmala Sitharaman proposed to raise capex target to ₹1212.2 lakh crore for FY27 from ₹11.2 lakh crore earmarked for current fiscal.

Presenting the Union Budget 2026-27, Sitharaman said that the government pegs fiscal deficit at 4.3% of GDP in FY27, lower than 4.4% in FY26.

The total expenditure envelope includes revenue expenditure, such as salaries, pensions, subsidies, and interest payments, as well as capital expenditure directed toward building long-term assets like highways, railways, ports and defence infrastructure. It also covers the Centre’s transfers to states through tax devolution and grants.

FY26 capex

By comparison, the Budget 2025 had set total expenditure at ₹50.65 lakh crore, with total receipts excluding borrowings estimated at ₹34.96 lakh crore. Net tax receipts were projected at ₹28.37 lakh crore, and the fiscal deficit was expected to be 4.4 per cent of GDP.

The 2025 Budget also showed the government’s infrastructure-led growth strategy, with capital expenditure of ₹11.21 lakh crore, amounting to 3.1 per cent of GDP. To finance its spending, the Centre had estimated gross market borrowings of ₹14.82 lakh crore for that year.

In the previous Budget, the government prioritised agriculture with schemes for pulses, cotton and higher KCC credit. MSMEs received higher limits, credit support, start-up funds and sector-specific initiatives. Investments focused on education, skilling, healthcare and urban infrastructure, including Atal Tinkering Labs, AI centres, medical seats, Jal Jeevan Mission and regional connectivity. Innovation and R&D were backed with ₹20,000 crore, fellowships, gene banks and geospatial projects.

The government had also announced the Export Promotion Mission and BharatTradeNet to empower the export sector. Other financial reforms included 100% FDI in insurance and credit enhancement. Taxes were simplified, exemptions raised, TDS/TCS rationalised and indirect duties adjusted to support manufacturing, trade and exports.