India's Central Government Achieves Fiscal Deficit Target of 4.4% of GDP for FY26
Central Government's gross fiscal deficit stood at 4.4% of GDP in FY26
Business Standard
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The Reserve Bank of India reported that the Central Government's gross fiscal deficit (GFD) was 4.4% of GDP for the fiscal year 2025-26, meeting its target of below 4.5%. The government plans to further reduce the deficit to 4.3% of GDP in 2026-27 through careful expenditure management.
- 01Central Government's gross fiscal deficit stood at 4.4% of GDP for FY26.
- 02The target of below 4.5% was achieved through expenditure rationalization and increased non-tax revenue.
- 03For FY27, the GFD is projected to decrease to 4.3% of GDP.
- 04Revenue expenditure is planned to be contained at 10.5% of GDP.
- 05The revenue expenditure to capital outlay ratio indicates a focus on maintaining expenditure quality.
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According to the Reserve Bank of India (RBI), the Central Government's gross fiscal deficit (GFD) was 4.4% of GDP for the fiscal year 2025-26, successfully meeting its target of keeping the GFD below 4.5% as outlined in the Union Budget 2021-22. This achievement was facilitated by a combination of rationalized expenditures and higher-than-expected non-tax revenue receipts. Looking ahead, the government has set a more ambitious target for the fiscal year 2026-27, aiming for a GFD of 4.3% of GDP. To achieve this, the budget plans to limit revenue expenditure to 10.5% of GDP, down from 10.8% in FY26, while maintaining capital expenditure at 3.1% of GDP. The revenue expenditure to capital outlay ratio (RECO) remains low at 4.4, indicating a commitment to preserving the quality of government spending.
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The government's efforts to manage the fiscal deficit may lead to more stable economic conditions, potentially influencing public spending and investment.
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