Modi government should meet FY26 fiscal deficit target of 4.4%
What's the story
India is on track to meet its fiscal deficit target of 4.4% of GDP for the financial year 2025-26 (FY26), according to a report by PricewaterhouseCoopers (PwC). The prediction comes despite the National Statistical Office's recent downward revision of the nominal GDP growth rate from 10.1% to 8%. PwC Partner and Economic Advisory Services Leader Ranen Banerjee acknowledged that while the adjustment raised general concerns, he expressed confidence that India could still meet its fiscal deficit target.
Fiscal outlook
Government's fiscal performance and future projections
Banerjee noted that even with the downward revision of the nominal GDP growth rate, the absolute numbers are nearly in line with budget estimates. He emphasized this indicates that "the denominator is not shrinking," which should allow the government to comfortably meet its 4.4% fiscal deficit target. He also highlighted that India had achieved a fiscal deficit of 4.8% against a target of 4.9% of GDP pegged for FY25.
Surplus potential
Potential to exceed fiscal deficit target
Banerjee said there's a possibility that the government could even exceed its fiscal deficit target for FY26. "It has a headroom to actually better it," he said, adding, "optically speaking, it could be pegged at 4.3% because it is a kind of signal that we are actually not only meeting the fiscal consolidation targets but we are overachieving them."
Budget revision
Fiscal deficit for FY26
Finance Minister Nirmala Sitharaman had pegged the fiscal deficit for FY26 at ₹15.69 lakh crore, or 4.4% of GDP, in her Budget speech last year. Banerjee noted that the National Statistical Office's revision of nominal GDP growth is in line with expectations. He attributed this to softer wholesale price indices, especially food and oil prices, which have lowered the deflator and narrowed the gap between nominal and real GDP growth.