Debt-To-GDP Ratio Above 60% to be Core Focus for Reduction in FY26, Says Finance Minister

Union Finance Minister Nirmala Sitharaman said on December 17 that reducing India’s debt-to-GDP ratio will be the government’s “core focus” in the next financial year. Speaking at the India Economic Conclave, she noted that the ratio, which crossed 60% during the Covid period, has started declining but needs further reduction.

The minister also urged states to lower their debt levels, citing Reserve Bank of India (RBI) data showing areas of concern. Fiscal discipline and bond market development will remain key priorities to achieve long-term economic goals.

Debt-To-GDP Ratio and Fiscal Management

The debt-to-GDP ratio surged beyond 60% during the pandemic as the government increased spending to support the economy. Sitharaman emphasised that bringing this ratio down is essential for achieving the Viksit Bharat vision.

She warned that high debt stock at elevated interest rates could hinder growth if not addressed promptly. The Union government plans to maintain fiscal discipline through stable policies and consistent monitoring of debt levels.

Bond Market Development and Capital Flow

The finance minister highlighted efforts to deepen India’s bond market to attract more funds and improve liquidity. A robust bond market will provide alternative financing channels and reduce reliance on traditional borrowing.

Sitharaman credited policy stability under Prime Minister Narendra Modi’s leadership for creating confidence among investors. She said a strong regulatory framework and predictable fiscal policies are critical for sustaining investor trust.

Trade Policy and Global Negotiations

Sitharaman noted that India contributes about 25% to global trade and must navigate tariff-related challenges carefully. She criticised the growing trend of tariff weaponisation by some countries, stressing that India’s tariffs were never intended as a weapon.

The minister said India will protect its economy and industries while negotiating trade agreements amid geopolitical uncertainties. She called for a balanced approach to safeguard domestic interests without isolating global partners.

Read More: India to Roll Out Export Promotion Mission Components for Labour-Intensive Sectors.

Conclusion

Reducing the debt-to-GDP ratio, strengthening the bond market, and maintaining fiscal discipline will be central to India’s economic strategy in FY26. The government aims to create a sustainable growth path while managing external trade challenges and supporting private sector expansion.

With services contributing around 60% to GDP and manufacturing gaining traction, policy measures will focus on enabling sectors to scale globally. These steps are expected to reinforce India’s position as a resilient and competitive economy.

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.