What is the story about?
Brokerage commentary on the Union Budget 2026 broadly converges on one theme: fiscal credibility has been preserved, even if consolidation is slowing.
Morgan Stanley says the Budget strikes a balance between debt reduction, growth support and a shallow pace of fiscal consolidation, the slowest since the pandemic, with fiscal math seen as realistic and credible.
It also flags a symbolic shift in priorities, citing that the Budget speech almost opens with "semiconductors", signalling a clear pivot in the government's view of India's growth drivers.
Deutsche Bank calls the fiscal stance conservative and supportive of macro-financial stability, while HDFC Bank says the finance minister has leaned on foundations rather than fireworks, with assumptions firmly on the cautious side.
Axis Bank adds that the hardest phase of fiscal consolidation is now behind, with fiscal headwinds to growth beginning to fade.
On growth, Morgan Stanley expects the Budget to support a cyclical recovery through continued capex, alongside structural measures to strengthen manufacturing and services.
Axis Bank and HDFC Bank both describe the government's 10% nominal GDP growth assumption as conservative, with Axis Bank expecting the actual outcome to be better and pointing to continued improvement in tax-to-GDP trends and conservative GST assumptions. Deutsche Bank also sees the nominal GDP estimate as credible.
Views on fiscal consolidation suggest continuity, but at a slower pace. Morgan Stanley sees consolidation continuing, though more gradually.
HDFC Bank says that the debt reduction path is gentler than earlier estimates and warns that faster consolidation may be required later to reach the 50% plus or minus 1% debt target by FY31, with the new GDP series potentially influencing the final ratio.
Axis Bank says that the FY26 revised estimate deficit undershot the Budget by 8 bps, while the FY27 target is 10 bps above expectations, with the pace of tightening slowing sharply.
It adds that the primary deficit is now about 0.9 percentage points below pre-Covid levels, supporting the debt trajectory, but cautions that without stronger disinvestment, further consolidation could be challenging.
Deutsche Bank flags that the FY27 deficit target is in line with expectations, though it sees scope for a small rise in revenue expenditure and a slight slippage in capital expenditure.
Government borrowing numbers, however, have drawn more mixed reactions. HDFC Bank says net borrowing of ₹11.7 lakh crore is in line with expectations, but gross borrowing at ₹17.2 lakh crore is higher than estimates.
It says that the headline number excludes GST cess maturities and buybacks, and that similar buybacks to FY26 could still soften the effective supply.
With the RBI holding nearly ₹1 trillion of G-Secs maturing in FY27, switches could also help reduce borrowing pressure, though higher gross borrowing may weigh on sentiment and keep the 10-year yield in the 6.70-6.80% range in the near term.
Deutsche Bank warns that gross market borrowings remain large and the demand-supply dynamic for bonds unfavourable, with elevated borrowing likely to persist into FY28, even as a conservative fiscal stance allows RBI OMOs to continue.
Axis Bank says the financing assumptions look overly conservative, with small savings inflows assumed well below recent trends, and expects bond markets to be disappointed by the borrowing number, though some increase in T-bill issuance is seen as a marginal positive.
On disinvestment, caution dominates. Deutsche Bank cites downside risks to the ₹80,000 crore disinvestment target given the government's past track record, while Axis Bank reiterates that without a meaningful improvement on this front, sustaining further fiscal consolidation could prove difficult.
Morgan Stanley says the Budget strikes a balance between debt reduction, growth support and a shallow pace of fiscal consolidation, the slowest since the pandemic, with fiscal math seen as realistic and credible.
It also flags a symbolic shift in priorities, citing that the Budget speech almost opens with "semiconductors", signalling a clear pivot in the government's view of India's growth drivers.
Deutsche Bank calls the fiscal stance conservative and supportive of macro-financial stability, while HDFC Bank says the finance minister has leaned on foundations rather than fireworks, with assumptions firmly on the cautious side.
Axis Bank adds that the hardest phase of fiscal consolidation is now behind, with fiscal headwinds to growth beginning to fade.
On growth, Morgan Stanley expects the Budget to support a cyclical recovery through continued capex, alongside structural measures to strengthen manufacturing and services.
Axis Bank and HDFC Bank both describe the government's 10% nominal GDP growth assumption as conservative, with Axis Bank expecting the actual outcome to be better and pointing to continued improvement in tax-to-GDP trends and conservative GST assumptions. Deutsche Bank also sees the nominal GDP estimate as credible.
Views on fiscal consolidation suggest continuity, but at a slower pace. Morgan Stanley sees consolidation continuing, though more gradually.
HDFC Bank says that the debt reduction path is gentler than earlier estimates and warns that faster consolidation may be required later to reach the 50% plus or minus 1% debt target by FY31, with the new GDP series potentially influencing the final ratio.
Axis Bank says that the FY26 revised estimate deficit undershot the Budget by 8 bps, while the FY27 target is 10 bps above expectations, with the pace of tightening slowing sharply.
It adds that the primary deficit is now about 0.9 percentage points below pre-Covid levels, supporting the debt trajectory, but cautions that without stronger disinvestment, further consolidation could be challenging.
Deutsche Bank flags that the FY27 deficit target is in line with expectations, though it sees scope for a small rise in revenue expenditure and a slight slippage in capital expenditure.
Government borrowing numbers, however, have drawn more mixed reactions. HDFC Bank says net borrowing of ₹11.7 lakh crore is in line with expectations, but gross borrowing at ₹17.2 lakh crore is higher than estimates.
It says that the headline number excludes GST cess maturities and buybacks, and that similar buybacks to FY26 could still soften the effective supply.
With the RBI holding nearly ₹1 trillion of G-Secs maturing in FY27, switches could also help reduce borrowing pressure, though higher gross borrowing may weigh on sentiment and keep the 10-year yield in the 6.70-6.80% range in the near term.
Deutsche Bank warns that gross market borrowings remain large and the demand-supply dynamic for bonds unfavourable, with elevated borrowing likely to persist into FY28, even as a conservative fiscal stance allows RBI OMOs to continue.
Axis Bank says the financing assumptions look overly conservative, with small savings inflows assumed well below recent trends, and expects bond markets to be disappointed by the borrowing number, though some increase in T-bill issuance is seen as a marginal positive.
On disinvestment, caution dominates. Deutsche Bank cites downside risks to the ₹80,000 crore disinvestment target given the government's past track record, while Axis Bank reiterates that without a meaningful improvement on this front, sustaining further fiscal consolidation could prove difficult.
