Budget 2021: Govt likely to target fiscal deficit at 4% of GDP by FY26

Centre to deviate from long-standing medium-term target of 2.5-3% of GDP

The Centre is likely to lay down a road map in the upcoming Budget to reduce its fiscal deficit to 4 per cent of gross domestic product (GDP) by 2025-26.

This is necessary because there will be demands for expansionary policies, even in the next couple of years.

This implies the government is set to deviate from the long-standing medium-term target of 2.5-3 per cent of GDP as prescribed by amendments to the Fiscal Responsibility and Budget Management Act (FRBM).

The government had changed the recommendations of the N K Singh Committee on fiscal consolidation and targeted bringing down the