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Informist, Sunday, Feb. 1, 2026

--BUDGET: FY27 debt-to-GDP ratio seen 55.6% of GDP 

--BUDGET: Debt-to-GDP ratio estimated at 56.1% for FY26 

--BUDGET: Debt-to-GDP reduction to cut interest payments 

NEW DELHI – The Union Budget has estimated the debt-to-GDP ratio at 55.6% of GDP for 2026-27 (Apr-Mar), 50 basis points lower than the estimate of 56.1% of GDP for FY26. FY27 will be the first year of the government move to target debt as percentage of GDP as the main parameter to track fiscal consolidation, instead of fiscal deficit. The government is looking to cut its debt-to-GDP ratio to 50% by March 2031, with a band of 100 bps on either side to provide some flexibility.

The target for FY27 is higher than what market participants had expected. According to an Informist poll, economists and market participants had expected the government to target a debt-to-GDP ratio of 55.1% for FY27. "A declining debt-to-GDP ratio will gradually free up resources for priority sector expenditure by reducing the outgo on interest payments," Finance Minister Nirmala Sitharaman said while presenting the Union Budget for FY27 Sunday. 

A portion of outstanding liabilities on the public account of India is on account of national small savings fund investments in special securities issued by state governments which would be repaid by the states at the time of maturity, according to Budget documents. If this liability is excluded, the adjusted central government debt is estimated at 55.1% of GDP at the end of FY27. The Budget pegged the fiscal deficit target for FY27 at 4.3% of GDP. The revised estimate for the fiscal deficit for FY26 was unchanged from the budget estimate at 4.4% GDP even though the revised estimate deficit amount was slightly lower in absolute terms from the budget estimate.  End

Reported by Pratiksha

Edited by Pankaj Aher

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