Budget 2026: Sitharaman trims FY27 fiscal deficit target to 4.3%

Finance Minister Nirmala Sitharaman on Sunday set the fiscal deficit target at 4.3% of GDP for 2026-27, reaffirming the government’s commitment to fiscal consolidation while continuing to prioritise capital spending to support growth.

The target represents a marginal improvement over the 4.4% of GDP estimated for 2025-26 and reflects the Centre’s effort to normalise public finances as pandemic-era support is phased out.

“I am happy to inform that I have fulfilled my commitment made in 2021-22 to reduce fiscal deficit below 4.5% of GDP by 2025-26,” Sitharaman said while presenting the Union Budget. She added that the revised estimate for 2025-26 remains at 4.4% of GDP, and “in line with this, the fiscal deficit for 2026-27 is estimated to be 4.3% of GDP”.

The finance minister also outlined the government’s medium-term debt strategy, reiterating its intention to align public finances with globally accepted fiscal norms. She said the Centre is targeting a debt-to-GDP ratio of 50%, plus or minus one percentage point, by 2030-31.

"In line with this, the debt-to-GDP ratio is estimated to be 55.6 percent of GDP in Budget Estimates of 2026-27, compared to 56.1 percent of GDP in Revised Estimates of 2025-26," she said.

On the expenditure side, Sitharaman said non-debt receipts in revised estimates for FY26 stand at ₹34 lakh crore, including net tax receipts of ₹26.7 lakh crore. Total expenditure is estimated at ₹49.6 lakh crore, with capital outlay of about ₹11 lakh crore.

For 2026-27, capital expenditure has been budgeted at ₹11.7 lakh crore, underlining the government’s continued focus on infrastructure creation. The remaining funding requirement will be met through small savings and other sources, while gross market borrowing is estimated at ₹17.2 lakh crore.