Centre meets FY26 fiscal deficit target of 4.4% of GDP

The Centre has met its FY26 fiscal deficit target of 4.4% of GDP while achieving nearly 98% of its capital expenditure goal, supported by strong spending on infrastructure and state assistance programmes.

Written by Prasanta Sahu

May 28, 2026 00:11 IST

India’s fiscal position may come under pressure in FY27 due to rising fertiliser and fuel subsidy costs linked to the West Asia conflict, although officials expect any fiscal deficit slippage to remain manageable.

The Centre has met the fiscal deficit target of 4.4% of GDP for FY26 based on the new GDP series, with almost 99% achievement of expenditure target set for the year, sources told FE.

Capital expenditure stood at Rs 10.7 lakh crore against the revised budget estimate of Rs 10.96 lakh crore, achieving 98% of the target. Total expenditure came in at around Rs 49 lakh crore, marginally lower than the FY26 revised estimate of Rs 49.6 lakh crore, sources said.

“The year ending was smooth; capex, the Special Assistance to States for Capital Investment (SASCI), and devolution to states went well,” a senior official said.

There was no deliberate cut in expenditure, though some variance may exist in some ministries and schemes.

“For fertilizer subsidy, we have given lots of money in the last fiscal year, which was a good thing because their opening balance was good for FY27,” the official said, referring to the additional requirement in the current year due to a spike in imported fertiliser and natural gas prices.

The government is facing substantial additional expenditure on fertiliser and fuel subsidies in FY27 due to the sharp increase in import prices of these commodities.

“Now, crude oil is a problem because it impacts so many activities. It is a tough year. Suddenly, external factors have made the fiscal situation very challenging, but it is premature to assess the full-year impact at this point,” the official added.

India’s fiscal deficit in FY27 may overshoot the budgeted target to some extent, as the Centre is implementing a series of relief and stabilisation measures to shield citizens, farmers, and businesses from the fallout of the escalating West Asia conflict.

However, officials had earlier told FE that the slippage would remain “manageable” given the government’s relatively stronger fiscal position, supported by several years of post-pandemic fiscal consolidation.

In the Budget, the Centre projected a fiscal deficit of 4.3% of GDP for FY27 and envisaged a gradual reduction in central government debt to 55.6% of GDP. Those estimates are now expected to be recalibrated as higher subsidy outgo and revenue foregone from tax cuts begin to weigh on government finances amid rising global crude prices and trade disruptions.

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This article was first uploaded on May twenty-eight, twenty twenty-six, at eleven minutes past twelve in the am.