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Fiscal Deficit Cut to 4.3% in Budget 2026-27 as Govt Sticks to Prudent Path

Finance Minister Nirmala Sitharaman has projected a reduction in the fiscal deficit to 4.3% of GDP for the 2026-27 financial year, continuing the government's fiscal consolidation path. The budget proposes a significant capital expenditure outlay of Rs 12.2 lakh crore to boost infrastructure and create jobs. Key fiscal metrics show improvement, with the debt-to-GDP ratio set to decline to 55.6%, reducing interest burdens. The government also announced a new Infrastructure Risk Development Fund to accelerate major projects and stressed deeper global integration for growth.

Key Points: Budget 2026-27: Fiscal Deficit Cut to 4.3%, Capex at Rs 12.2 Lakh Cr

  • Fiscal deficit target 4.3% of GDP
  • Capex increased to Rs 12.2 lakh crore
  • Debt-GDP ratio to fall to 55.6%
  • New Infrastructure Risk Development Fund
2 min read

Fiscal deficit cut to 4.3 per cent in Budget 2026-27 as govt sticks to stable growth path

FM Nirmala Sitharaman projects fiscal deficit at 4.3% of GDP for 2026-27, with higher capital expenditure and a declining debt-GDP ratio.

"India must be deeply integrated with global markets, exporting more and attracting foreign investment as well. - Nirmala Sitharaman"

New Delhi, Feb 1

Finance Minister Nirmala Sitharaman on Sunday projected a further reduction in the fiscal deficit to 4.3 per cent of GDP for 2026-27 as the government continues on the path of fiscal consolidation to ensure economic growth with stability.

Presenting the Budget 2026-27, she said that the government had fulfilled its commitment to reduce the fiscal deficit to 4.4 per cent in the Budget for 2025-26 and would now reduce it further to 4.3 per cent as it continues on the fiscal prudence path.

FM Sitharaman said that the target reflects a balance between supporting economic momentum and keeping public finances stable. The fiscal deficit represents the gap between the government's total expenditure and its total revenue.

She said that the government would go for net borrowing of Rs 11.7 lakh crore in FY27 from dated securities to fund its fiscal deficit, while the gross market borrowing is pegged at Rs 17.2 lakh crore.

The Finance Minister also said that India's debt-GDP ratio has come down to 56.1 per cent in 2025-26 and would be further reduced in the Budget for 2026-27 to 55.6 per cent.

The decline in the debt-GDP ratio will reduce the Government's outgo on interest payments, which will help to keep a lower fiscal deficit and free up resources for development, she said.

The Finance Minister announced capital expenditure of Rs 12.2 lakh crore in the Budget for 2026-27, to boost big-ticket infrastructure projects for boosting growth and jobs in the economy.

This represents an increase of 2.2 lakh crore over the corresponding figure of the previous fiscal year.

The Finance Minister said that an Infrastructure Risk Development Fund would be set up to accelerate the development of big projects.

She said to push economic growth, the Budget proposes to deliver a powerful push to infrastructure, including highways, ports, railways and power projects, scale up manufacturing in 7 strategic sectors and create champion MSMEs.

She further stated that the government has maintained fiscal prudence and monetary stability whilst maintaining a strong thrust on public investments

India must be deeply integrated with global markets, exporting more and attracting foreign investment as well, Sitharaman stressed.

- IANS

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Reader Comments

P
Priya S
Numbers look good on paper, but I hope this fiscal prudence doesn't mean cuts in essential social sector spending. What about healthcare and education? The infra push is welcome, but development must be inclusive.
R
Rohit P
Rs 12.2 lakh crore for capex! That's massive. Building highways, ports, and railways will have a huge multiplier effect. This is how you build a foundation for a $5 trillion economy. Kudos to the FM for sticking to a stable path.
S
Sarah B
As someone watching from abroad, this is a very positive signal for foreign investors. Reducing debt-GDP ratio and sticking to fiscal consolidation targets shows serious macroeconomic management. Makes India a more attractive destination.
V
Vikram M
The borrowing numbers are still very high (Rs 17.2 lakh crore gross). While the direction is good, the absolute debt burden on the country is increasing. We need to focus more on increasing tax revenue and disinvestment.
K
Kavya N
Hope the Infrastructure Risk Development Fund actually helps in speeding up projects. So many projects get stuck due to land acquisition and clearance delays. Execution is key now! Also, glad to see the focus on manufacturing. Atmanirbhar Bharat in action 💪

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