Fiscal Deficit Estimated To Be 4.3% Of GDP In FY27: Nirmala Sitharaman

In her Budget 2026 speech, Finance Minister Nirmala Sitharaman reaffirmed the government's commitment to fiscal consolidation while maintaining support for economic growth. She announced that the fiscal deficit for 2025-26 has been set at 4.4% of India's Gross Domestic Product (GDP). 

The fiscal deficit represents the gap between the government's total expenditure and its total revenue, excluding borrowings, and is largely financed through market borrowing.

Looking ahead, the Finance Minister set a lower fiscal deficit target of 4.3% of GDP for 2026-27. This gradual reduction underscores the Centre's strategy of tightening its finances in a calibrated manner, rather than resorting to abrupt cuts that could hurt growth or essential welfare and infrastructure spending. By signalling a clear glide path towards lower deficits, the government aims to reassure investors, rating agencies and global markets about the sustainability of India's public finances.

Sitharaman also highlighted the broader debt position of the country, stating that India's debt-to-GDP ratio is projected to decline to 55.6% of GDP. The debt-to-GDP ratio is a key indicator of a country's ability to service its debt; a falling ratio generally points to improving fiscal strength and greater resilience to external shocks. A lower ratio suggests that the economy is growing faster than the accumulation of public debt, providing more room for productive public investment when needed.

Together, the fiscal deficit targets and the projected decline in the debt-to-GDP ratio present a narrative of disciplined yet growth-supportive fiscal management.