NEW DELHI New Delhi: India remains a bright spot globally on the back of its strong macro fundamentals and the government should focus on fiscal prudence and pursue the path of fiscal consolidation, a new report has suggested. . According to an SBI Research report ahead of Union Budget 2025-26, nominal GDP growth for FY26 is expected to be 10.2 per cent, “assuming real GDP growth remains at 6.2 to 6.4 per cent and inflation at 4 to 3.8 per cent.” “Hence, nominal GDP will be Rs 357.2 lakh crore,” the report predicts.

Fiscal deficit as a percentage of GDP may come in at 4.5 per cent (Rs 15.9 lakh crore) in FY26. “However, we must also recognize that in a world of uncertainties for much of the external sector, there is no harm in slightly altering the glide path to promote growth,” the report argues. While some portion of the COVID-19 pandemic borrowings are due to be repaid, gross market borrowings (Rs 14.4 lakh crore) can be expected in FY26 due to increase in redemptions, resulting in net borrowings. Rs 11.2 lakh crore (redemption of Rs 4.05 lakh crore in FY26 and expected switch of Rs 75,000 to Rs 100,000 crore).

The government has undertaken buybacks of Rs 1.1 lakh crore and switches of Rs 1.46 lakh crore so far in FY25. According to the report, “Communication from policymakers and regulators should be clear and take into account the expectations of market participants. Just “Schemes like Just-in-Time (JIT) that may impact systemic liquidity need to be carefully rebalanced to take into account first-order as well as second-order impacts.”

Talking about GST, the report said that GST (GST 2.0) requires a second round of reforms with rationalization of tax rates and inclusion of electricity duty, then aviation turbine fuel and finally petrol/diesel. It is also necessary to exempt/reduce health insurance products from GST for all retail and health focused products.