Feasible to meet 4.4% fiscal deficit target for FY26: Economists

EVEN AMID SLOWING nominal GDP growth and ambitious fiscal consolidation plan, economists broadly agree that the Union government can still meet its headline fiscal deficit goal of 4.4% of GDP for FY26, compared with 4.8% in FY25.

- PRASANTA SAHU

The management will, however, be anchored by expenditure discipline.While absolute fiscal numbers may hold, expenditure discipline will face pressure, requiring deft management through the year, the economists feel. A key concern is nominal GDP growth. The Union Budget assumed a 10.1% expansion in FY26, while current estimates cluster closer to 8-8.5%. Bank of Baroda chief economist Madan Sabnavis cautions that lower nominal growth could stress fiscal ratios even if the absolute deficit doesn't rise.

India Ratings chief economist Devendra Pant and ICRA chief economist Aditi Nayar, however, allayed the worry by highlighting the upward revision of FY25 GDP. Because the base has been revised higher, even a slower growth rate in FY26 could still deliver a nominal GDP level equal to or higher than ₹356.98 lakh crore assumed in the Budget, they noted. This arithmetic significantly reduces the risk of a mechanical fiscal slippage, they reckon.

On the expenditure side, an additional ₹65,000 crore is required for fertiliser subsidies and for food during the year.