Consolidation on track as the center balances growth push with fiscal discipline
The government on Sunday projected the fiscal deficit at 4.3 per cent of gross domestic product (GDP) for FY27, signalling continued progress on fiscal consolidation even as it sustains higher capital expenditure to support economic growth.
The fiscal deficit is budgeted to decline from 4.8 per cent of GDP in FY25 to 4.4 per cent in FY26 and further to 4.3 per cent in FY27, according to budget documents.
The Economic Survey, tabled in Parliament on Thursday, attributed the steady decline in the fiscal deficit to improved revenue buoyancy, rationalisation of expenditure, and a calibrated shift towards growth-enhancing capital spending.
According to the survey, the fiscal deficit has narrowed sharply from a pandemic-era high of 9.2 per cent of GDP in FY21 to 4.8 per cent in FY25, based on Provisional Accounts (PA).
The government has budgeted the deficit to decline further to 4.4 per cent of GDP in FY26, keeping it firmly on a downward trajectory.
The Centre has repeatedly underscored its commitment to fiscal discipline while protecting productive spending. The emphasis on capital expenditure, officials argue, helps improve the quality of expenditure by supporting long-term growth without unduly straining public finances.
Economists see the continued reduction in the fiscal deficit as critical for maintaining macroeconomic stability, containing borrowing costs, and preserving investor confidence—especially at a time when global financial conditions remain volatile.
The government has reiterated its medium-term objective of bringing the fiscal deficit down to around 4.5 per cent of GDP while ensuring that growth-supportive spending remains intact.
The economic survey released on Thursday also explained the decline in the fiscal deficit. It stated that the fiscal deficit has declined significantly from 9.2 per cent of GDP in FY21 to 4.8 per cent of GDP in FY25, according to the Provisional Accounts (PA). It is further budgeted to decline to 4.4 per cent of GDP in FY26.
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Rajat Mishra leads business news coverage at Firstpost.com. An award-winning business journalist with over seven years of experience, he has worked across some of India’s leading newsrooms. His reporting spans the macroeconomy, financial markets, and India Inc., with a keen focus on decoding complex data and trends for readers.
An alumnus of the AJK Mass Communication Research Centre, Jamia Millia Islamia, Rajat can be followed on X at @RajatMishra9518. For story ideas and pitches, he can be reached at Rajat.Mishra@nw18.com. When not tracking numbers and policy moves, he enjoys wandering the Himalayas and exploring society beyond spreadsheets.
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