FY27 debt-to-GDP may rise by 140 bps

WITH THE NOMINAL GDP size shrinking for FY23-FY26 in the new series using the 2022-23 base, the Centre’s debt-to-GDP ratio will likely rise by 1.4 percentage points to 57% in FY27, compared with the budget target of 55.6%, making the debt consolidation plan challenging.

- PRASANTA SAHU

WITH THE NOMINAL GDP size shrinking for FY23-FY26 in the new series using the 2022-23 base, the Centre’s debt-to-GDP ratio will likely rise by 1.4 percentage points to 57% in FY27, compared with the budget target of 55.6%, making the debt consolidation plan challenging.

Similarly, the smaller nominal GDP size could also make the fiscal deficit 10 basis points higher at 4.5% in FY26 and 4.4% of GDP in FY27, compared with the budget targets of 4.4% and 4.3%, respectively. This estimate is based on the government’s latest forecast of 11%

Smaller nominal GDP size could also make the fiscal deficit 10 bps higher at 4.5% in FY26 and 4.4% of GDP in FY27