Budget 2026: India to borrow ₹17.2 lakh crore in 2026-27

The government has pegged India’s net market borrowing at ₹11.7 lakh crore for the next fiscal year, slightly below the level in 2025-26, Finance Minister Nirmala Sitharaman said.

The announcement comes amid a period of rising bond yields, driven by heavy federal and state government borrowings that have outstripped demand for government debt. Despite a cumulative 125-basis-point policy rate cut by the Reserve Bank of India over the past year, the benchmark 10-year bond yield remains marginally higher than in February 2025.

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Market expectations had pointed to gross borrowings in the range of ₹16 lakh crore to ₹17.5 lakh crore, with the median estimate from a Reuters poll of 35 economists at ₹16.3 lakh crore. Traders caution that persistent heavy issuance by the Centre and states could keep yields elevated, even with the RBI’s record bond purchases and foreign-exchange swaps designed to inject liquidity.

Government bond markets were closed on Sunday, but analysts expect the benchmark 10-year yield could edge higher when trading resumes on Monday. “The negative reaction may partially be offset by the choice of paper from the Reserve Bank of India for Thursday’s open market purchase,” a trader at a private bank said.

The borrowing plan aligns with the government’s shift to a debt-to-GDP ratio target. For FY27, the ratio is projected at 55.6%, supporting a fiscal deficit of 4.3% of GDP. The metric, which tracks the gap between government spending and revenue, is closely monitored for its implications on borrowing needs, debt levels, and market confidence.