Budget 2026: FM Sitharaman pegs fiscal deficit at 4.3% of GDP for FY27

FM Nirmala Sitharaman pegged FY27 fiscal deficit at 4.3% of GDP, signalling continued fiscal consolidation, with net tax receipts seen at ₹28.7 trillion and higher tax devolution to states

Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026 on Sunday, pegged the fiscal deficit for the financial year 2026–27 (FY27) at 4.3 per cent of gross domestic product (GDP), down from 4.4 per cent in FY26.

 

“The fiscal deficit is one of the key operational indicators for debt targeting. I am happy to inform this August House that I have fulfilled my commitment made in 2021–22 to bring the fiscal deficit below 4.5 per cent of GDP. In the Revised Estimates (RE) for 2025–26, the fiscal deficit is pegged at 4.4 per cent of GDP, in line with the Budget Estimates (BE). In keeping with the new path of fiscal prudence and debt consolidation, the fiscal deficit for 2026–27 is estimated at 4.3 per cent of GDP,” Sitharaman said.

 

 

The fiscal deficit refers to the gap between the government’s total expenditure and revenue. The decline also comes in line with expectations from the Union Budget 2026.

 

Sitharaman said the net tax receipts are projected at ₹28.7 trillion, while the Centre will devolve ₹1.4 trillion in taxes to states in the next financial year.

 

In her 2024–25 Budget speech, the Finance Minister had said that from 2026–27 onward, fiscal policy would be steered to ensure that the Centre’s debt declines as a share of GDP.

 

The combined debt of the Centre and states stood at about 85 per cent of GDP in 2024, of which the Centre accounted for roughly 57 per cent. In a developing economy like India, a fiscal deficit in the range of 3–4 per cent of GDP is widely viewed as a sustainable level that supports growth while maintaining macroeconomic stability.