The Union government closed FY25 with a fiscal deficit of 4.8 per cent of GDP, undershooting the budgeted 4.9 per cent, and has set a target of 4.4 per cent for FY26. This marks a sharp turnaround from the pandemic-era peak of 9.2 per cent in FY21
The Economic Survey 2025–26 said the Union government closed FY25 with a fiscal deficit of 4.8 per cent of GDP, undershooting the budgeted 4.9 per cent, and has set a target of 4.4 per cent for FY26. This marks a sharp turnaround from the pandemic-era peak of 9.2 per cent in FY21, fulfilling the medium-term consolidation roadmap announced in 2021.
Unlike earlier phases of deficit reduction that relied heavily on expenditure restraint, the current consolidation is underpinned by strong “revenue mobilisation and improved expenditure quality”, the Survey said.
“Revenue receipts increased from an average of about 8.5 per cent of GDP during the pre-pandemic period (FY16-FY20) to around 9.1 per cent of GDP in the post-pandemic period (FY22-FY25 PA). This improvement was driven primarily by higher gross tax revenue, which rose from an average of 10.8 per cent of GDP to about 11.5 per cent of GDP over the same period,” the survey said.
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