Budget FY27 Lays Medium-Term Growth Roadmap, Shifts Focus to Manufacturing and Services: HDFC Bank Chief Economist

Srinagar, Feb 2, KNT: The Union Budget for FY27 has laid out a medium-term roadmap aimed at boosting domestic growth and productivity amid rising global uncertainties, with a clear shift in policy emphasis towards manufacturing and the services sector, according to Sakshi Gupta, Principal Economist at HDFC Bank.

In her assessment, Gupta noted that unlike the previous budget, which prioritised consumption through income tax rationalisation, the FY27 budget has moved focus towards strengthening manufacturing and services as engines of sustainable growth. She said this shift reflects the government’s intent to enhance productivity and long-term economic resilience.

The budget proposes the setting up of a standing committee for the banking system to support the Viksit Bharat goal. Emphasis on tourism, health, education, and skilling signals a strategic push to raise India’s share in global services exports to 10 percent, she said.

On the domestic production front, infrastructure development continues to remain central to the government’s plans. Gupta pointed out that electronics, semiconductors, rare earth magnets, and chemicals have been identified as priority areas under the Viksit Bharat framework. She added that labour-intensive sectors affected by tariffs, including textiles and micro, small and medium enterprises, have been extended greater policy support.

Assessing the fiscal arithmetic, Gupta said the budget appears conservative, with the government assuming nominal GDP growth of 10 percent for FY27, slightly lower than HDFC Bank’s estimate of 10.5 percent. The capital expenditure target has been set at a moderate growth of 11.5 percent, with the government banking on increased participation of private capital.

She said the overall fiscal framework looks credible and prudent, aimed at gradual fiscal consolidation in FY27. However, Gupta cautioned that the higher-than-expected gross borrowing of ₹17.2 lakh crore could impact market sentiment, especially as demand and supply imbalances have already been exerting pressure on bond yields.

“We expect the 10-year bond yield to open higher tomorrow,” she said, pointing to near-term market implications of the borrowing programme.

The budget’s broader strategy, economists say, underscores a balancing act between sustaining growth momentum, encouraging private investment, and maintaining fiscal discipline in a challenging global economic environment. [KNT]