Reaction to the Union Budget 2026 from economists remained measured, with a mix of reassurance on fiscal consolidation and caution over borrowing levels. Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said the government has continued to prioritise fiscal discipline, broadly aligning with market expectations. According to Bhardwaj, the fiscal deficit target for FY27 has been set at 4.3 per cent, while net market borrowing also remains in line with estimates. “The government has continued to focus on fiscal consolidation. The FY27 fiscal deficit at 4.3% and net borrowing is in line with our expectations,” she said, indicating continuity in the Centre’s medium-term fiscal roadmap.
However, she flagged concerns over the scale of gross borrowing announced in the Budget. The gross borrowing figure of Rs 17.2 trillion came in sharply higher than anticipated and could have implications for financial markets. “The sharply higher than expected gross borrowing of Rs 17.2tn is expected to weigh heavily on market sentiments,” Bhardwaj noted.
She added that the absence of bond buybacks or switches contributed to the unexpected upside in gross borrowing, taking markets by surprise. “No buybacks or switches have led to the surprise upside to the gross borrowing,” she said.
Overall, while the Budget reinforces the government’s commitment to fiscal consolidation, the borrowing mix and magnitude may pose near-term challenges for bond markets and investor sentiment.