New Delhi, Jan. 20 -- India's fiscal policy is expected to become less contractionary from FY27 as the Centre prepares to pivot from a fiscal-deficit-focused approach to a debt sustainability framework, according to a pre-Budget note by BofA Securities. The shift comes as the government remains on track to meet its medium-term fiscal consolidation targets despite slower nominal GDP growth and sweeping tax cuts.

The Finance Minister will present the Union Budget for FY2026-27 on February 1, with the central government likely to meet its FY26 fiscal deficit target of 4.4% of GDP. BofA projects a modest reduction in the deficit to 4.3% of GDP in FY27, signaling a pause in aggressive consolidation and a move towards maintaining fiscal suppor...