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

Continuing on the path of fiscal consolidation, Finance Minister Nirmala Sitharaman on Sunday pegged fiscal deficit at 4.3 per cent of GDP for the next fiscal as against 4.4 per cent for the financial year ending March 2026.

"Government has been delivering on our fiscal commitments consistently without compromising on social needs. To strive towards accepted standards of fiscal management, in Budget 2025-26, I had indicated that the Central Government would target reaching a debt-to-GDP ratio of 50±1 per cent by 2030-31," she said while announcing Budget 2026-27 in the Lok Sabha.

In line with this, she said, the debt-to-GDP ratio is estimated to be 55.6 per cent of GDP in Budget Estimate (BE) 2026-27, compared to 56.1 per cent of GDP in Revised Estimate (RE) 2025-26.

A declining debt-to-GDP ratio will gradually free up resources for priority sector expenditure by reducing the outgo on interest payments, she said.

Observing that one of the main operational instruments for debt targeting is the fiscal deficit, she said, "I am happy to inform this august House that I have fulfilled my commitment made in FY 2021-22 to reduce fiscal deficit below 4.5 per cent of GDP by 2025-26. In RE 2025-26, the fiscal deficit has been estimated at par with the BE of 2025-26 at 4.4 per cent of GDP."

In line with the new fiscal prudence path of debt consolidation, she said, the fiscal deficit in BE 2026-27 is estimated to be 4.3 per cent of GDP.

Fiscal deficit in absolute terms works out to be Rs 16,95,768 crore for FY27.

The general government debt-to-GDP ratio was 85 per cent in 2024, which included central government debt of 57 per cent.

The government is committed to keep fiscal deficit in each year (from FY 2026-27 till FY 2030-31) such that the central government debt is on a declining path to attain a debt-to-GDP level of about 50±1 per cent by March 31, 2031, from the current level of 55.6 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.

To finance the fiscal deficit, she said, the net market borrowings from dated securities are estimated at Rs 11.7 lakh crore.

"The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs 17.2 lakh crore," she said.