The Economic Research Department of the State Bank of India (SBI) has released its comprehensive pre-budget report, outlining key projections and policy recommendations for the upcoming Union Budget 2026-27. The report highlights that India remains an "ocean of certainty" amid global economic fragmentation and heightened geopolitical tensions. SBI Research expects the government to maintain its path of fiscal prudence, projecting the fiscal deficit for FY27 at 4.2% of GDP, based on an estimated nominal GDP growth of 10.5% to 11%.
To sustain the country’s growth momentum, the report suggests that the central government’s capital expenditure (Capex) should cross the ₹12 lakh crore milestone, marking a 10% year-on-year increase. The net borrowing for the Centre is estimated at approximately ₹11.7 trillion. Economists at SBI indicate that these fiscal targets are aligned with the long-term goal of bringing the debt-to-GDP ratio down to 50% by March 2031, ensuring enduring macroeconomic stability.
A significant portion of the report is dedicated to incentivizing household financial savings. SBI Research has proposed that the taxation on interest from bank deposits be aligned with Capital Gains tax rates to ensure that traditional saving instruments remain competitive against other asset classes. Furthermore, it recommends reducing the lock-in period for Tax-Saving Fixed Deposits from five years to three years, bringing them at par with Equity Linked Savings Schemes (ELSS). For individual taxpayers, the report anticipates a potential reduction in marginal tax rates to support consumption and provide relief to the middle-income segment.
In the social security and insurance sectors, the report advocates for a separate tax deduction limit for Health and Term Insurance premiums to improve insurance penetration, which has seen a recent decline. To strengthen the pension ecosystem, SBI Research suggests increasing the deduction limits under Section 80CCD(1B) for the NPS Vatsalya scheme and calls for a technological revamp of the EPFO to bring it in line with the efficiency of the National Pension System (NPS). Overall, the report envisions a balanced budget that prioritizes fiscal discipline while fostering an environment conducive to domestic investment and inclusive growth.