Centre remains well on track to achieve 4.4% fiscal deficit target for FY26

The Government is well on track to meet the fiscal deficit target of 4.4 per cent of GDP estimated for the current financial year based on broad trends, the Economic Survey 2025-26 tabled in Parliament on Thursday said.

According to the survey prepared by Chief Economic Advisor V Anantha Nageswaran and team, the central Government’s fiscal trajectory stands out for combining consolidation with sustained public investment, earning three sovereign rating upgrades this year.

Between FY20 and FY25 (Provisional Actual), the share of capital spending in the total central Government expenditure increased from about 12.5 per cent to 22.6 per cent, while effective capex as a share of GDP rose from roughly 2.6 per cent to 4 per cent, the survey said.

Even as states are overshooting their revenue deficit, the central Government, through its Special Assistance to States for Capital Expenditure / Investment (SASCI), has successfully incentivised states to maintain capital expenditure at around 2.4 per cent of GDP, it said, adding the expansion of unconditional cash transfers across several states has contributed to rising revenue expenditure, with implications for fiscal space and public investment at the State level.

“Based on the broad trends observed during the year, the central Government remains well on track to achieve its envisaged fiscal consolidation path, aiming to attain a fiscal deficit target of 4.4 per cent of GDP in FY26,” it said.