India's fiscal deficit to drop to 4.5% or lower by fiscal 2026: Economic Survey

India's fiscal deficit is expected to drop to 4.5 per cent of GDP or lower by fiscal 2026, according to the Economic Survey 2023-2024.

Aiming to reach a fiscal deficit level below 4.5 per cent of the GDP by 2025-26, Finance Minister Nirmala Sitharaman had curtailed the budget deficit aim for 2024-25 to 5.1% in the Interim budget for this fiscal year. Economists now expect Sitharaman to further trim the budget deficit target when she presents the full BUdget for this fiscal year on July 23.

The Economic Survey, an annual report on the state of the economy prepared by the Department of Economic Affairs, noted that Idia's fiscal deficit has dropped from 6.4% in fiscal 2023 to 5.6% in iscal 2024, aided by strong growth in direct and indirect taxes on account of resilient economic activity. Increased tax compliance also helped India to collect more taxes than budgetary estimates.


Higher-than-budgeted non-tax revenue in the form of RBI dividends also boosted revenue receipts, it said.

"A decomposition of the fiscal deficit over the past few years reveals that with a narrowing revenue deficit, a larger share of the fiscal deficit is being accounted for by capital outlay. This suggests that the productivity of borrowed resources has improved," the Survey said.