India: IGB view stays neutral – Standard Chartered

Standard Chartered Bank economists Anubhuti Sahay, Saurav Anand and Nagaraj Kulkarni assess Indian states’ finances, projecting the aggregate FY27 fiscal deficit at 2.9% of GDP, similar to FY26. They highlight slower revenue proceeds, persistent high revenue expenditure and steady capex near 1.9% of Gross Domestic Product (GDP). Wider deficits should lift State Development Loan issuance, while the team maintains a Neutral stance on Indian Government Bonds.

States’ deficits, SDL supply and IGB outlook

"We analysed the budget for India’s 27 states for FY26 (ended March 2026) and FY27 (targeted), and present our key findings below."

"The states are likely to run an aggregate fiscal deficit of 2.9% of GDP in FY27, in line with the trend since FY25."

"We expect the fiscal deficit for FY27 to stay closer to the trend seen in the last two years, and see a risk of it widening if crude oil prices stay higher for longer."

"We expect FY27 capex to be maintained at 1.9% of GDP (2.3% including capex loans from the central government)."

"Assuming 86-90% of this is financed via market borrowing, net SDL issuance could be in the range of INR 9.6-10.0tn, c.4-9% higher than our previous estimate of INR 9.2tn."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)