Hyderabad: The Union Government has set a fiscal deficit target of 4.3 per cent of GDP for FY 2026–27. Finance Minister Nirmala Sitharaman outlined the target in the Medium-term Fiscal Policy cum Strategy Statement tabled in Parliament. The strategy follows the fiscal consolidation roadmap announced in FY 2021–22. It targets a central debt-to-GDP ratio of 50±1 per cent by FY 2030–31.
The Budget Estimates (BE) for FY 2026–27 show a planned reduction in the fiscal deficit from below 4.5 per cent in FY 2025–26. This meets the deficit target announced in Budget 2021–22. Meanwhile, estimates place the debt-to-GDP ratio at 55.6 per cent for FY 2026–27.
The government projects revenue receipts at ₹35.33 lakh crore, a 5.7 per cent rise over FY 2025–26 Revised Estimates. Net tax revenue is expected to reach ₹28.67 lakh crore. Non-tax revenue may touch ₹6.66 lakh crore. In addition, gross tax revenue is likely to grow by 8 per cent to ₹44.04 lakh crore.
The Budget retains the States’ share in the divisible tax pool at 41 per cent, as recommended by the Sixteenth Finance Commission. Accordingly, tax devolution to states is estimated at ₹15.26 lakh crore. Finance Commission grants are pegged at ₹1.4 lakh crore. Together, transfers to states total ₹16.56 lakh crore in BE 2026–27. However, achieving the deficit target will require close coordination between the Centre and states.
Capital expenditure remains a policy priority
The government has set total expenditure for FY 2026–27 at ₹53.47 lakh crore, up 7.7 per cent from last year. Of this, ₹12.22 lakh crore is earmarked for capital expenditure. This includes ₹2.0 lakh crore as special assistance loans to states. Aligning capital spending with fiscal targets supports consolidation efforts.
Effective capital expenditure stands at ₹17.15 lakh crore. This equals 4.4 per cent of GDP.
On the growth front, India’s real GDP is expected to grow by 7.4 per cent in FY 2025–26, according to the National Statistics Office. The services sector may expand by 9.1 per cent. Manufacturing and construction are projected to grow by 7 per cent each. Strong growth will support fiscal discipline.
Private consumption remains resilient. Private final consumption expenditure forms 61.5 per cent of GDP, the highest share since FY 2012. Meanwhile, investment activity stays steady. Gross fixed capital formation stands at 30 per cent of GDP.
External indicators also show strength. Total exports reached USD 825.3 billion in FY25. FDI inflows touched USD 81.0 billion, the highest for the first seven months of any year. Meanwhile, the current account deficit narrowed to 0.8 per cent of GDP in H1 FY26, down from 1.3 per cent a year earlier.