India’s tax collections could surge in FY27, with gross tax buoyancy rising to 1.1 from a projected 0.64 in FY26, a report said on Wednesday. 

The report from HDFC Bank said that nominal GDP growth is expected at about 10.1 per cent in FY27 after an estimated 8.5 per cent in FY26. It said that capital expenditure is expected to grow by 10.5 per cent to about Rs 11.5–12 lakh crore while revenue expenditure may rise 9.5 per cent to Rs 41.9 lakh crore.

The government’s fiscal deficit target of 4.4 per cent for FY26 is likely to be achieved, with the deficit pegged at about Rs 15.79 lakh crore versus the budget estimate of Rs 15.69 lakh crore, the report said.

It added that fiscal consolidation will continue in the upcoming Union Budget 2026-27, with a target of 4.2 per cent for FY27 compared to 4.4 per cent in FY26. The report projected debt/GDP ratio of 55.1 per cent compared to 56.1 per cent in FY26 (BE).

Higher government bond supply will keep demand/supply mismatches, creating scope for open market operation (OMO) purchases of about Rs 4–Rs 4.5 lakh crore in FY27 and keeping the 10‑year yield elevated in a 6.5–6.7 per cent range.

“An announcement around India’s inclusion in the Bloomberg bond index, a favorable borrowing profile (short term tilt rather than long-term), continued liquidity support from RBI and FII flows could help provide support to bond yields,” the report noted.

A recent report from a think tank forum called for prioritising freezing peak direct tax rates, expanding the direct tax base through technology, avoiding MRP‑based taxation and completing the GST credit chain in the upcoming Union Budget.

The Budget should outline a phased roadmap to bring petroleum, electricity and other excluded inputs under GST to restore tax neutrality and reduce cascading costs for industry, it added.

It also listed other priorities including incentivising productive reinvestment and aggressively curtailing the parallel economy.