New Delhi, Feb. 2 -- The Union Budget for FY27 has adopted a calibrated approach to fiscal consolidation while prioritising higher government spending and sector-specific incentives, according to a report by Jefferies.

The fiscal deficit has been pegged at 4.3 per cent of GDP, a modest 10 basis point reduction from FY26, lower than market expectations of a sharper consolidation.

The slightly higher-than-expected deficit, along with an incremental borrowing requirement of around Rs 1.4 trillion year-on-year, could exert upward pressure on bond yields, posing near-term challenges for NBFCs and PSU banks, the report noted.

Capital expenditure remains a key pillar, with overall government capex projected to grow 11 per cent in FY27. Defenc...