Lower FY26 nominal GDP to raise fiscal deficit, debt ratios

Lower nominal gross domestic product (GDP), according to the second advance estimates, is estimated to slightly increase the fiscal deficit and debt ratios, and this is expected to necessitate a steeper consolidation path, going forward.

- RUCHIKA CHITRAVANSHI

Using a nominal GDP of ₹345.47 trillion as the denominator, the fiscal deficit for FY26 would be 10 basis points (bps) higher at 4.5 per cent, and the debt-to-GDP ratio would be around 58 per cent.

Assuming a 10 per cent growth in the nominal GDP in FY27, the fiscal deficit target for the next financial year would also be marginally higher at 4.46 percent of GDP against the 4.3 percent estimated in the Budget.

“This would also have some bearing on the debt consolidation roadmap, with the debt-to-GDP pegged 1.9 percentage points (pp) higher at 57.5 per cent for FY27. This is against the budgeted target of 55.6 per cent, making the consolidation path into FY31 relatively steeper than previously estimated,” said Aditi Nayar, chief economist, Icra.