Budget 2026: Finance Minister Nirmala Sitharaman has in the Union Budget 2026 pegged India’s fiscal deficit at 4.3% of gross domestic product (GDP) for FY27, as against 4.4% for FY26.
Speaking in the Lok Sabha on 1 February (Sunday), Sitharaman said, “The 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% by 2030-31.”
Growth in focus: FM raises government capex target slightly
Highlighting the sustained increase in government capital expenditure (capex) over the years, Sitharaman in her Budget speech proposed to increase the government capex to ₹12.2 lakh crore for FY27 from ₹11.2 lakh crore in FY26.
“Public capex has increased manifold from ₹2 lakh crore in FY14-15 to an allocation of ₹11.2 lakh crore in BE 2025-26. In FY2026-27, I propose to increase it to ₹12.2 lakh crore to continue the momentum,” she said.
According to Crisil, the ₹12.2 lakh crore budget outlay for capital expenditure marks an 8.9% increase over the current fiscal and is in line with expectations, but lower than the likely need.
Here’s are the big numbers at a glance
- Sitharaman further added that the debt-to-GDP ratio is estimated to be 55.6% of GDP in Budget Estimate (BE) 2026-27, compared to 56.1% 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 added.
Government debt-to-GDP ratio: How do the numbers fare?
The general government debt-to-GDP ratio was 85% in 2024, which included central government debt of 57%, as per a PTI report.
The Centre has committed to keep fiscal deficit in each year (from FY27 to FY31) such that its debt is on a declining path to attain a debt-to-GDP level of about 50±1% by March 31, 2031, from the current level of 55.6%.
A fiscal deficit of 3-4% is considered comfortable and a desirable target for a growing, developing economy like India, aiming to balance economic expansion with financial stability, the report added.
Further, Basant Bafna, head of fixed income at Mirae Asset Investment Managers (India) told Mint that the net market borrowing of ₹11.7 lakh crores “is broadly in line with market expectations”.