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India's Fiscal Deficit Stays on Track Despite GDP Revision, Says UBI

A Union Bank of India report states India's fiscal dynamics remain comfortable, with the fiscal deficit for April-January contained at 63% of the revised estimates. This comes despite a downward revision in nominal GDP for FY26 by approximately Rs 10 lakh crore due to a base year change. The report indicates the government is likely to comfortably achieve its revised fiscal deficit target of 4.4% of GDP, aided by strong tax revenue collection. The upcoming budget targets further consolidation, aiming to reduce the deficit to 4.3% of GDP in FY2026-27.

Key Points: India Fiscal Deficit Comfortable Despite GDP Revision: UBI

  • Fiscal deficit at 63% of RE for Apr-Jan
  • Nominal GDP revised down by ~Rs 10 lakh crore
  • Deficit target of 4.4% likely achievable
  • Net tax revenue at 78% of target
  • FY27 deficit target set at 4.3%
2 min read

Despite downward revision in nominal GDP, India's fiscal dynamics remain comfortable: UBI Report

UBI report says India's fiscal dynamics remain strong with deficit at 63% of RE, likely to meet 4.4% target despite nominal GDP downward revision.

"overall fiscal dynamics remain very comfortable despite downward revision in nominal GDP - Union Bank of India Report"

New Delhi, March 3

Despite a downward revision in nominal GDP following a change in the base year, India's overall fiscal dynamics remain very comfortable, with the fiscal deficit contained at 63 per cent of the revised estimates during April-January FY26, according to a report by Union Bank of India.

On the statistical front, the report highlighted that with the GDP base year revised to 2022-23 from 2011-12, nominal GDP levels have been adjusted.

Nominal GDP for FY26, as per the second advance estimate, is now placed at Rs 347 lakh crore, around Rs 10 lakh crore lower compared to the first advance estimate using the old base.

The report said "overall fiscal dynamics remain very comfortable despite downward revision in nominal GDP".

The lower nominal GDP poses an upside risk of around 10-15 basis points in the fiscal deficit as a percentage of GDP for FY26, against the 4.4 per cent budgeted level, assuming receipts and expenditure targets under the revised estimates are met.

However, the report said that with expenditure trends lagging the RE target and a possibility of an upside surprise from tax numbers, the central government is likely to comfortably achieve its revised fiscal deficit target of 4.4 per cent of GDP in FY26.

In absolute terms, India's fiscal deficit for April-January FY26 stood at Rs 9.81 lakh crore, or 63 per cent of the revised estimates, compared to Rs 11.70 lakh crore, or 74.5 per cent of the RE, in the corresponding period last year.

The report noted that receipts have outperformed expenditure so far. Net tax revenue target achieved stands at 78 per cent of the revised target, leaving only 22 per cent to be met in the remaining two months of the financial year, which appears achievable.

On the expenditure side, spending stands at 74 per cent of the RE, with Rs 12.75 lakh crore yet to be spent in the remaining two months. This indicates that there is scope for expenditure rationalisation going forward.

The Union Budget for FY2026-27 has reiterated the government's commitment to fiscal consolidation, with a target to reduce the fiscal deficit to 4.3 per cent of GDP in FY2026-27 from 4.4 per cent in FY2026 (RE).

While central finances remain on track, the report added that sustained fiscal consolidation will depend on coordinated capital expenditure execution and revenue mobilisation at both the central and state levels.

- ANI

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Reader Comments

R
Rahul R
Comfortable dynamics are one thing, but I'm concerned about the Rs 12.75 lakh crore yet to be spent in just two months. That's a huge amount. Will this lead to rushed, inefficient spending at the year-end just to meet targets? We've seen that happen before.
A
Aman W
The report mentions "expenditure rationalisation" as a scope. This is crucial. Instead of last-minute splurging, the focus should be on quality capex that creates jobs and boosts manufacturing. Let's hope the remaining spending is smart and strategic.
S
Sarah B
As someone following global economies, it's impressive to see India maintaining its fiscal consolidation path. The 4.3% target for next year is ambitious but achievable if tax revenues continue to surprise on the upside. Coordination with states will be key.
K
Karthik V
Good to see net tax revenue at 78% of target! This reflects better compliance and a broadening tax base. However, the common man is still feeling the pinch of inflation. Fiscal discipline must not come at the cost of cutting essential social sector spending. A delicate balance is needed.
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Nisha Z
The base year change for GDP calculation was long overdue. While it shows a lower nominal number, it gives a more accurate picture for future planning. The fact that fiscal health remains strong even after this revision is the real takeaway. Thumbs up from an economics student! 👍

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