Debt-GDP ratio may dip to 55.1%, fiscal deficit to 4.2%

POLICY SHIFT

- PRASANTA SAHU

THE CENTRE'S DEBT-TO-GDP ratio in 2026-27 may be reduced by one percentage point to nearly 55.1%, signalling a structural shift in India's fiscal policy framework.

A one-percentage-point reduction in the debt ratio would translate into a fiscal deficit of around 4.2% of GDP in FY27, compared with the budgeted 4.4% in FY26.

The debt ratio, rather than the fiscal deficit alone, is emerging as the primary anchor of medium-term fiscal management, with the deficit continuing to serve as an operational tool to achieve the broader objective of sustainable public debt.