Market sources: India willing to let fiscal deficit widen to 4.8% of GDP

India's fiscal deficit for the first eight months of the 2025-26 fiscal year reached Rs 9.76 lakh crore, equivalent to 62.3% of the annual target, marking widening from 52.5% in the same period last year. Despite this, the government remains committed to narrowing the fiscal gap to 4.4% of GDP for the full fiscal year, down from 4.8% in the previous year. Total receipts for the period stood at Rs 19 lakh crore, while overall expenditure reached Rs 29.25 lakh crore, reflecting 55.7% and 57.8% of the budget target, respectively.

Revenue receipts totaled Rs 19.10 lakh crore, with tax revenue at Rs 13.93 lakh crore and non-tax revenue at Rs 5.16 lakh crore. Non-tax revenue saw a significant boost due to Rs 2.69 lakh crore dividend from the Reserve Bank of India. The government has also outlined reduce debt to 50% of GDP by March 31, 2031, shifting its focus to debt-to-GDP as the key benchmark for fiscal policy starting in 2026-27. This approach aligns with enhance transparency and flexibility in fiscal management.