Union Budget: FM Sitharaman pegs fiscal deficit lower at 4.3 pc of GDP for 2026-27

Finance Minister Nirmala Sitharaman on Sunday said the government expects the fiscal deficit to be at 4.3 per cent of the GDP in 2026-27, lower than 4.4 per cent projected for the current financial year.

In her 2026-27 Budget speech, Sitharaman also said the government will provide Rs 1.4 lakh crore as tax devolution amount to the states in the next financial year while the net tax receipts is estimated at Rs 28.7 lakh crore.

The size of the Budget for 2026-27 is pegged at Rs 53.5 lakh crore. In 2026-27, the fiscal deficit is estimated at 4.3 per cent, the minister said as the government moves on the fiscal prudence path of debt consolidation.

The budgeted fiscal deficit, which is the difference between the government expenditure and income, for the current fiscal (April 2025 to March 2026 or FY26), is estimated at 4.4 per cent of GDP.

The finance minister, in her 2024-25 budget speech, had stated that from 2026-27 onwards, fiscal policy would endeavour to maintain the fiscal deficit in a way that the central government debt is on a declining path as a percentage of GDP.

The general government debt-to-GDP ratio was 85 per cent in 2024, which included central government debt of 57 per cent. A fiscal deficit of 3-4 per cent is considered comfortable and a desirable target for a growing, developing economy like India, aiming to balance economic expansion with financial stability.

In the speech on Sunday, Sitharaman also said the new Income Tax Act, 2025 will be implemented from April 1, and the rules and tax returns forms will be notified shortly.