The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman on 1 February 2026, set the fiscal deficit target for the financial year 2026–27 (FY27) at 4.3 percent of GDP.
The announcement was made in Parliament, alongside a significant increase in capital expenditure allocations and a continued focus on infrastructure-led growth.
The fiscal deficit target reflects the government’s commitment to fiscal consolidation while supporting economic expansion.
According to Financial Express, the FY27 fiscal deficit target of 4.3 percent was revealed as part of the budget speech, which also included a nearly 9 percent rise in capital spending to ₹12.2 lakh crore.
The Finance Minister emphasised that the higher capital expenditure is intended to maintain momentum in infrastructure projects and overall economic growth.
As reported by The Indian Express, the budget outlined measures such as the establishment of dedicated Real Estate Investment Trusts (REITs) and an Infrastructure Risk Guarantee Fund to support infrastructure financing and mitigate risks for private sector participation.
As per the Hindustan Times, the increase in capital expenditure to ₹12.2 lakh crore for FY27 represents a continuation of the government’s strategy to drive economic growth through public investment.
The Finance Minister highlighted the expansion of infrastructure in tier-2 and tier-3 cities, aiming to create new growth centres and support urban development.
The fiscal deficit target for FY27 is part of a broader fiscal consolidation path, with the government aiming to gradually reduce the deficit while maintaining adequate buffers for external shocks.
Coverage revealed that the government is recalibrating its fiscal policy anchor, shifting focus towards the debt-to-GDP ratio as a long-term measure of fiscal health.
“The government is expected to shift focus to India’s debt-to-GDP ratio instead of a fiscal deficit target seen at 4.2 percent in FY27,” the budget coverage noted, highlighting the evolving fiscal policy framework.
The fiscal deficit target and increased capital expenditure are also intended to attract private investment and foreign capital.
Fiscal consolidation remains a key priority, with the government signalling its intent to reduce the deficit in a calibrated manner. The budget’s approach is expected to allow for reasonable growth in budgetary capital expenditure while maintaining fiscal stability as details emerged.
“The government has set a long-term target to reduce the debt-to-GDP ratio to 50 percent (±1 percent) by FY2030-31, signalling a shift toward aggressive debt consolidation to boost sovereign ratings,” the analysis stated.
In summary, the Union Budget 2026’s fiscal deficit target of 4.3 percent for FY27 is positioned within a framework of fiscal prudence, increased capital expenditure, and ongoing reforms to support sustainable economic growth and macroeconomic stability according to recent updates.
Note: This article is produced using AI-assisted tools and is based on publicly available information. It has been reviewed by The Quint's editorial team before publishing.