Budget 2026 sets ambitious target for debt-to-GDP ratio
Finance Minister Nirmala Sitharaman's latest budget sets a new target: the government wants its debt-to-GDP ratio at 55.6% for FY27, trimming it from this year's 56.1%.
The fiscal deficit is also set to dip to 4.2% of GDP, down from last year's 4.4%.
The big-picture goal? Bring the ratio closer to 50% by FY31—even as overall government debt hovers near a hefty 85%.
Why is this significant?
India's debt-to-GDP ratio shot up during the pandemic and hasn't dropped below 55% since, so these targets are part of getting back on track financially.
If things go as planned—with nominal GDP growth between about 9.5-11%—the country could return to pre-pandemic fiscal health and meet long-term rules meant to keep borrowing in check.
Analysts say lower government debt could create additional investment space for priority areas such as health, education and capital expenditure, and could improve fiscal stability over time.