India’s FY26 fiscal deficit to range between 4.4-4.6% of GDP, say economists

India could peg its FY26 fiscal deficit at 4.4-4.6% of the gross domestic product (GDP) in the upcoming budget, according to Goldman Sachs and Standard Chartered economists.

In separate notes released Monday, Standard Chartered expects fiscal consolidation to continue, while Goldman Sachs cautioned that fiscal impulse will remain a drag on the growth next financial year.

"We expect a 0.1 percentage point of GDP upside in total receipts as we expect direct tax revenues to remain buoyant. On the expenditure side, we factor in a 0.4% of GDP reduction in current expenditure excluding interest and subsidies, while we expect capex to remain at 3.2% of GDP partly aided by higher transfer to states for capex," said Goldman Sachs.


Standard Chartered projects a fiscal deficit of 4.5% of GDP for FY26, anticipating that reliance on the Reserve Bank of India (RBI) dividends is likely to remain significant in the next financial year to support fiscal consolidation.

Goldman Sachs highlighted that higher income tax collections and non-tax revenues are likely to provide an upside of 0.2% of GDP in receipts, offset by an equivalent shortfall in expenditure, enabling the government to meet its fiscal deficit target of 4.9% of GDP for FY25.

On capital expenditure, the investment banking firm forecasts a 13% year-on-year increase in allocation, lower than 30% recorded in FY21-24.

Standard Chartered estimates a 10% growth in central government capex for FY26.