Budget 2026: India Sets FY27 Fiscal Deficit Target at 4.3%

The Union Budget 2026-27 marked another step towards fiscal discipline, with the government setting the fiscal deficit target for FY27 at 4.3% of GDP. This estimate aligned with earlier guidance and reflected the Centre’s steady effort to narrow the gap between expenditure and income. Alongside this, the debt-to-GDP ratio was projected to improve to 55.6% in FY27, compared with 56.1% in the current financial year, signalling gradual improvement in public finances.

Key Borrowing and Revenue Numbers

The budget laid out detailed borrowing and revenue plans for FY27. Net market borrowing was set at ₹11.7 lakh crore, while gross market borrowing stood at ₹17.2 lakh crore. On the revenue side, non-debt receipts were estimated at ₹36.5 lakh crore, supported by net tax receipts of ₹28.7 lakh crore. These numbers pointed to confidence in tax collections and other income streams, even as spending priorities remained intact.

Progress Over Previous Years

Fiscal consolidation had already gained momentum over the past few years. The fiscal deficit for FY25 was revised down to 4.8% of GDP, aided by strong tax revenues and a higher-than-expected dividend transfer from the Reserve Bank of India. The FY26 deficit target was also revised lower to 4.4%, reinforcing the government’s commitment to bring the deficit below 4.5%.

Provisional data showed that between April and December, the Centre’s fiscal deficit stood at ₹8.558 lakh crore, lower than the same period last year. This improvement came even as total expenditure increased, indicating better control over finances.

Capital Expenditure Remains a Priority

Despite the focus on fiscal discipline, capital spending continued to remain a key pillar. Capital expenditure for the nine-month period rose to ₹7.879 lakh crore, compared with ₹6.853 lakh crore a year earlier. For FY27, the capex target was raised to ₹12.2 lakh crore, underlining the government’s intent to support infrastructure development and long-term economic growth.

Read more: Union Budget 2026: Who Are the Key Officials Working Behind the Scenes?

Conclusion

Overall, Budget 2026 struck a balance between growth and stability. By setting a lower fiscal deficit target and improving debt metrics while maintaining strong capital spending, the government signalled a measured and credible approach to managing public finances. This steady path of consolidation was likely to support macroeconomic stability and investor confidence over the medium term.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.