India, Jan. 16 -- The government is likely to peg India's fiscal deficit target at 4.3% of the GDP for 2026-27 amid a double-digit growth in capital expenditure, ICRA said.

Union Budget 2026 is set to be an interesting one, the Mumbai-based ratings agency said in a budget-expectations note released on Friday. The government's focus is shifting to medium-term debt consolidation from annual fiscal deficit targets, as well as the implementation of the 16th Finance Commission for the next five years.

ICRA expects the government to increase its capex by 14% to Rs.13.1 lakh crore in FY27 before fiscal rigidities (8th Pay Commission) come into effect in FY28.

To be sure, ICRA's estimate of 4.3% fiscal deficit in FY27 is 10 basis points lower ...