FM lowers fiscal deficit target

The government has revised its fiscal deficit target downward to 4.8% of GDP for the current financial year, improving from the earlier estimate of 4.9%. For 2025-26, the deficit is pegged at 4.4% of GDP, reflecting the administration’s focus on fiscal prudence despite global and domestic economic challenges.

Presenting the Budget, the Finance Minister announced that total receipts (excluding borrowings) for 2025-26 are projected at Rs 34.96 lakh crore, while total expenditure stands at Rs 50.65 lakh crore. Net tax receipts are expected to reach Rs 28.37 lakh crore.

To finance the fiscal deficit, the government plans to raise Rs 11.54 lakh crore through net market borrowings from dated securities. Additional funding will come from small savings and other sources, with gross market borrowings estimated at Rs 14.82 lakh crore.

The Budget maintains a strong focus on capital expenditure, with an allocation of Rs 11.21 lakh crore for FY26. This includes Rs 1.5 lakh crore in interest-free long-term loans for state governments. Compared to FY20, the capital outlay is now nearly 3.3 times higher, underscoring the government’s commitment to infrastructure-led growth.

For FY25, the initial capital expenditure allocation was Rs 11.1 lakh crore, but revised estimates suggest an actual expenditure of Rs 10.18 lakh crore. Meanwhile, the Central Government’s debt-to-GDP ratio is expected to decline from 57.1% in FY25 to 56.1% in FY26. The revenue deficit is also projected to shrink from 4.8% to 4.4% of GDP during this period.

Economists view these fiscal measures positively. According to Debopam Chaudhuri, Chief Economist at Piramal Group, the debt market should benefit from the government’s fiscal discipline. Despite economic growth falling short of expectations in FY25, the fiscal deficit of 4.8% was better than the targeted 4.9%. Although the Economic Survey anticipates GDP growth to remain at or below 6.8% in FY26, the government’s fiscal deficit forecast of 4.4% reflects a commitment to economic stability.