India CEA: see FY26 fiscal deficit at 4.5%

India CEA: see FY26 fiscal deficit at 4.5%

India’s Fiscal Deficit in FY26: CEA Estimate vs. Revised Government Projections
As of February 2026, India’s fiscal deficit for the fiscal year 2025-26 (FY26) remains a focal point of economic discussion. The government’s revised estimate for FY26 stands at 4.4% of GDP, while the Chief Economic Advisor (CEA) has projected a slightly higher deficit of 4.5%. This discrepancy reflects ongoing challenges in aligning revenue collection with expenditure priorities amid a post-pandemic economic landscape.

Finance Minister Nirmala Sitharaman, in her Budget 2026 presentation, reaffirmed the government’s commitment to fiscal consolidation, trimming the fiscal deficit target for FY27 to 4.3% of GDP—a marginal reduction from FY26’s revised estimate. This adjustment underscores efforts to normalize public finances while maintaining capital spending to sustain growth. For FY27, total expenditure is budgeted at ₹49.6 lakh crore, with capital outlay prioritized at ₹11.7 lakh crore, emphasizing infrastructure development.

The government’s medium-term fiscal strategy also highlights a shift toward stabilizing the debt-to-GDP ratio. While the FY26 revised estimate for debt-to-GDP is 56.1%, the target for FY27 is 55.6%, with a long-term goal of 50% (±1 percentage point) by 2030-31. To meet fiscal goals, the Centre plans to leverage non-debt receipts, including ₹26.7 lakh crore in net tax collections for FY26, alongside ₹17.2 lakh crore in gross market borrowing for FY27.

The CEA’s 4.5% estimate for FY26 suggests lingering pressures from elevated spending or slower-than-expected revenue realization. However, the government’s revised trajectory indicates progress toward its 2021-22 commitment to reduce the fiscal deficit below 4.5% by FY26. Balancing growth-oriented capital expenditure with fiscal discipline remains critical as India navigates macroeconomic stability and long-term debt management.

Economic Times, February 2026.