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Informist, Tuesday, Feb. 3, 2026

 

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--Econ secy: Aim to manage FY27 repayment without compromising on spending 
--Econ secy: To calibrate FY27 borrow calendar more finely on high repayment
--Econ secy: To carefully consider before cutting rates on NSSF plans
--Econ secy: Haven't cut NSSF rates as these are public-facing instruments
--Econ secy:Don't see high NSSF rates impeding rate transmission to bk deposit
--Econ secy: Confident of meeting divestment receipts aim for FY26, FY27
--Econ secy: See potential to end FY27 fiscally better than projected
--Econ secy: Strong econ momentum likely to help exceed FY27 receipts target
--Econ secy: Have chosen "gradual" fiscal consolidation for FY27
--Econ secy: Economists, experts advised to keep FY27 fisc gap at 4.4% of GDP
--Econ secy: Fiscal deficit for FY26 to be in line with aim of 4.4% of GDP
 

 

By Krity Ambey and Sagar Sen

 

NEW DELHI – Riding on India's strong economic momentum and with uncertainties from steep US tariffs now addressed, the government could end 2026–27 (Apr–Mar) in a stronger fiscal position than projected in the Budget, Economic Affairs Secretary Anuradha Thakur said. The Budget for the next financial year has pencilled in fiscal consolidation of 10 basis points to bring the fiscal deficit to 4.3% of GDP in FY27, along with a 50-bps reduction in the debt-to-GDP ratio to bring it to 55.6%.

 

Both targets appear conservative, especially against the backdrop of the sharp fiscal consolidation achieved over the past four years. "This year, we have chosen to be gradual, but there could be a chance of a better fiscal position (at the end of the year)," Thakur said in an interaction with Informist. At the same time, she stressed that fiscal strategy must remain sensitive to economic conditions. "If the economy is in a particular momentum, we don't want to disturb it," she said.

 

Thakur said during the Budget preparation, several economists and experts had advised the government to remain fiscally neutral and aim for a deficit of 4.4% of GDP next year to support growth. However, the government chose to stick to a consolidation path to preserve market credibility. "We were very clear that the trust of the market, which was built up quite painstakingly, should not be lost. We have to stay on that declining path; it cannot plateau," she said.

 

She added that irrespective of US tariffs easing to 18%, the current pace of economic activity could result in government revenues exceeding Budget estimates. The government has projected revenue receipts at INR 35.33 trillion in FY27, 5.7% higher than the revised estimates for FY26. 

 

Below are edited excerpts from the interview:
 

Q. The government has mentioned that the fiscal consolidation trajectory is gradual to support growth amid global uncertainties. Now that the India-US trade deal has addressed a large chunk of uncertainties, do you see the potential to end FY27 fiscally better than expected?

A. We could. I just see a certain momentum and enthusiasm in the economy, even the uptake in the private investment. And once these things happen, then they have a cycle of their own. I am hopeful that there will be, perhaps better receipts, and better momentum in the economy, which will probably help us have a better fiscal position. There is a fair likelihood that we could have numbers which show greater movement towards our glide path. In the pre-Budget consultations, we met multiple groups. Many of them advised us to keep fiscal deficit at 4.4% of GDP because the growth momentum needs to be maintained. But we were very clear that the trust of the market, which has got built up quite painstakingly, we don't want to lose that trust. We have to be on that declining path. It can't plateau. This year we have chosen to be gradual. But what you are saying is absolutely credible. There could be a chance that we have a better fiscal position. But even while doing that, we have to also respond to the economy. If the economy is in a particular momentum, we don't want to disturb it.

 

Q. Government's debt repayments are projected to rise sharply by 60% in FY27. What is your strategy for managing these elevated repayments?

A. The mechanisms that we have to manage repayments is well-known, whether we spread it out, whether we have a share in the treasury bills, how big is that. On the repayments, will we use the switch mechanism. We will see if there will be an occasion that when a repayment is coming up, we have some cash. We will calibrate that as we go forward. But it happens to be a year in which we are confronted with a very large repayment. While we have the National Small Savings Fund, which is available, we also need to borrow a certain amount from the market, which is in range. We will see the investor appetite, which tenure they are looking for, where they will give us the best rates, and what is the best thing for the market development. We will work on these principles, together with the Reserve Bank of India to finalise the borrowing calendar. But this year we will have to calibrate it more finely. These are all the options we have. And I do not want to cut down on any of the expenditures. I would reiterate we are not borrowing more to finance the fiscal deficit. Borrowing is needed, calibrated tightly already.

 

Q. The RBI, in its latest monetary policy report, pointed out that interest rates on NSSF small savings schemes are currently 27–140 basis points higher than levels implied by the designated formula, and that this could impede deposit rate transmission. Given that the repo rate has been cut by 125 basis points, why has the government not reduced interest rates on these schemes so far? Do you agree that elevated NSSF rates could slow deposit rate transmission in the banking system?

A. So far, we have not slashed the rates of interest on NSSF schemes, is because they are a very public-facing instrument. Before we take any call like that, we would like it to be well considered. That is the reason. Now on deposit rate transmission from the bank side, the quantum is totally different, it's really not fair to compare. I don't think banks are competing for the same money. I don't think so. 

 

Q. Your divestment target of INR 800 billion for FY27 is fairly high compared to the receipts seen in recent years and also considering the government has only met the target twice in the last 10 years. What gives you that confidence?

A. I would say that last 9-10 months are indicative to us that the divestment department has been really fully in action. We are very confident that they will achieve the target for this year; there are still two months left. They are working on many parallel deals, I am hopeful that they will be able to achieve the target for next year also. Multiple other means of divestments are also being taken up, and they have taken some steps on things which had been approved much long back. We are confident that the divestment department should be able to deliver much more in the coming years.  End

 

Edited by Tanima Banerjee 

 

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