Budget 2026-27: Fiscal deficit estimated at 4.3 pc of GDP for FY27

Finance Minister Nirmala Sitharaman, in her Budget 2026-27 speech in the Lok Sabha on Sunday (February 1), said fiscal deficit for the fiancial year 2026-27 is estimated at 4.3 per cent of GDP. This is lower than the 4.4 per cent projected for the current financial year.

From FY27 onwards, the Centre will adopt debt-to-GDP ratio as its primary fiscal indicator, with the ratio projected at 55.6 per cent in 2026–27, compared with 51.6 per cent in the revised estimates for 2025–26. The Budget also projected real GDP growth in the range of 6.8 to 7.2 per cent for FY27.

Also read: Economic Survey projects 6.8-7.2 pc growth for India in FY27

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.

Sitharaman, 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.

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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 support growth, the government increased infrastructure spending to ₹12.2 trillion, or about 3.1 per cent of GDP, while gross borrowing for FY27 is estimated in the range of ₹16 trillion to ₹16.8 trillion.