Centre may meet FY26 fiscal deficit target despite GST overhaul: Fitch

Forecasting agencies expect the Centre to maintain the fiscal deficit target of 4.4 per cent of gross domestic product (GDP) in 2025-26 (FY26), despite the goods and services tax (GST) rate rationalisation which may cost the exchequer around 0.2 per cent of GDP. 

“We estimate the fiscal cost of the reforms to be around 0.2 per cent of GDP annually, but the potential boost to consumption and growth will depend on the extent to which companies pass on lower taxes to consumers,” Fitch Ratings said in a research note, adding that the cut may reduce risks to growth outlook.  Separately, Bank of Baroda in a report said the impact of GST reforms will be minimal as it accounts for Rs 48,000 crore or only around 0.1-0.2 per cent of the GDP. “We continue to expect fiscal deficit target for FY26 to be met, as there remains a possibility that consumption improves significantly and the actual impact on revenues is even lower,” it added.