Daijiworld Media Network – New Delhi
New Delhi, Jan 11: The Union government is likely to meet its fiscal deficit target of 4.4 per cent of GDP for FY26 and could even outperform it, sending a strong and positive signal to global investors about India’s commitment to fiscal discipline, PwC Partner and Economic Advisory Services leader Ranen Banerjee has said.
Concerns had recently emerged after the National Statistical Office (NSO) revised the nominal GDP growth estimate for FY26 downward to 8 per cent from the earlier projection of 10.1 per cent, raising questions about the government’s ability to adhere to its fiscal consolidation roadmap.
However, Banerjee clarified that despite the downward revision in growth rate, the absolute nominal GDP numbers remain largely in line with Budget estimates. “The denominator is not shrinking,” he said, adding that this puts the government in a comfortable position to achieve the 4.4 per cent fiscal deficit target.
Notably, the Centre had already overachieved its fiscal deficit target in FY25, recording a deficit of 4.8 per cent against the budgeted 4.9 per cent of GDP.
“There is headroom to actually better the target. Optically, the fiscal deficit could even be pegged at 4.3 per cent, which would strongly signal that India is not just meeting but overachieving its fiscal consolidation goals,” Banerjee observed.
In the Union Budget presented last year, Finance Minister Nirmala Sitharaman had pegged the fiscal deficit for FY26 at Rs 15.69 lakh crore, equivalent to 4.4 per cent of GDP.
Banerjee noted that the NSO’s revision in nominal GDP growth aligns with broader macroeconomic trends, particularly softer wholesale price indices, including food and oil prices. These factors have reduced the GDP deflator, narrowing the gap between nominal and real GDP growth.
On the revenue front, he cautioned that lower nominal GDP growth could lead to a shortfall of around Rs 1.9 trillion in gross tax revenues. After adjusting for GST compensation cess, the net shortfall could be approximately Rs 75,000 crore.
Despite this, the Centre is expected to have a buffer of nearly Rs 0.5 trillion from unutilised GST compensation cess funds, providing additional fiscal comfort.
On the expenditure side, revenue expenditure is projected to be about 2 per cent lower than budget estimates, while capital expenditure is expected to reach close to 100 per cent of the budgeted level.
Taking these factors together, Banerjee said the fiscal deficit target remains well within reach, with potential tax revenue shortfalls likely to be offset by savings on the expenditure side.