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Informist, Monday, Mar. 2, 2026

 

MUMBAI – A downward shift in India's nominal GDP growth for the financial year 2025-26 (Apr-Mar) due to the new GDP series has pushed the estimated debt-to-GDP ratio higher by 2% in the current financial year. This, in turn, is likely to result in the Centre pushing back by two years its target of achieving a debt-to-GDP ratio of 50%, economists at ICICI Securities Primary Dealership said in a note Sunday. As of now, the Centre aims to achieve the target by FY31.

 

As per the new GDP series released Friday, the government's implied debt-to-GDP ratio is now seen at over 58% in FY26. The Union Budget for FY27, presented last month, had estimated the debt-to-GDP ratio for FY26 at 56.1%.

 

"...Debt/GDP ratio has also worsened by 2% of GDP, and that further calls into question government's ability to achieve FY31 target of 50% (with 1% uncertainty band around that). Given signs government is not keen for aggressive fall in fiscal deficit any more after achieving sharp consolidation in recent years, we think it is likely the timeline to achieve the target could be pushed out by a couple of years," the primary dealership said in the report.

 

FY27 will be the first year of the government moving to target debt as a 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 offer some flexibility.

Data published by the statistics ministry Friday showed India's nominal GDP growth is seen at 8.6% in FY26, according to the ministry's second advance estimate which replaced FY12 with FY23 as the base year. This is down from 9.7% a year ago and 11.0% in FY24. The Centre had estimated nominal GDP growth at 8.0% in its first advance estimate. While the pace of growth is higher this year, in absolute terms, the second advance estimate pegged nominal GDP at INR 345.47 trillion, lower than INR 357.14 trillion as per the Budget document.

 

This also pushes the fiscal deficit up to 4.5% of GDP in FY26 from the revised target of 4.4%. However, after the data release Friday, the government's Chief Economic Adviser V. Anantha Nageswaran had said nominal GDP growth is expected to be close to 11% in FY27 from 10% estimated in the Budget.  End

 

Reported by Cassandra Carvalho

Edited by Rajeev Pai

 

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