The Central Government is on track to achieve its fiscal deficit goal of 4.4 per cent of GDP for FY26 and may even surpass it, signalling strong fiscal discipline
to global investors. PwC Partner and Economic Advisory Services leader Ranen Banerjee noted that despite recent revisions in nominal GDP growth, India’s fiscal position remains strong. The National Statistical Office recently revised the nominal GDP growth projection from 10.1 per cent to 8 per cent, sparking concerns about whether the government can meet its fiscal deficit target. However, Banerjee pointed out that while the growth rate has been lowered, the absolute figures remain largely in line with budget estimates. "This means the denominator is not shrinking and the government should easily meet the 4.4 per cent fiscal deficit target," he said. Fiscal Discipline And Headroom India has a track record of exceeding fiscal targets, having achieved a 4.8 per cent fiscal deficit in FY25 against the 4.9 per cent goal. "It has a headroom to actually better it. We believe that optically speaking, it could be pegged at 4.3 per cent because it is a kind of signal that we are actually not only meeting the fiscal consolidation targets, but we are overachieving them," Banerjee added. Finance Minister Nirmala Sitharaman had pegged the FY26 fiscal deficit at Rs 15.69 lakh crore or 4.4 per cent of GDP in last year’s Budget. Tax Revenue, Expenditure, And Buffers Banerjee also noted that softer wholesale prices, particularly for food and oil, have contributed to a smaller gap between nominal and real GDP growth. While the lower nominal GDP could reduce tax revenues by around Rs 1.9 trillion, including GST compensation adjustments, the shortfall is expected to be around Rs 75,000 crore. The central government is likely to have a buffer of Rs 0.5 trillion from unutilised GST compensation funds. On the expenditure side, revenue spending is projected to be 2 per cent below budget estimates, while capital expenditure is expected to nearly hit 100 per cent of the planned amount. These factors collectively indicate that the fiscal deficit target remains within reach.
