Fiscal deficit target in reach despite lower nominal GDP growth estimate | Economy & Policy News – Business Standard

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The Budget estimates for this year had assumed a nominal GDP growth of 10.1 per cent

Nominal GDP for FY26, according to the first advance estimates, is Rs 357.14 trillion against the Budget estimates of Rs 356.98 trillion. Fiscal deficit at 4.4 per cent of nominal GDP was budgeted at Rs 15.7 trillion for FY2025-26.

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The government is likely to achieve its fiscal deficit target of 4.4 per cent despite a lower than budgeted print for the nominal gross domestic product (GDP) growth of 8 per cent in the first advance estimates released on Wednesday by the National Statistics Office.

With the nominal GDP for financial year 2024-25 (FY25) being revised upwards to ₹330.7 trillion, as compared to the budgeted amount of ₹324.1 trillion, the growth for FY26 has come down to 8 per cent.

The budget estimates for this year had assumed a nominal GDP growth of 10.1 per cent.

The nominal GDP for FY26, according to the first advance estimates, is ₹357.14 trillion against the budget estimates of ₹ 356.98 trillion. Fiscal deficit at 4.4 per cent of nominal GDP was budgeted at ₹15.7 trillion for FY26.

“This rules out a beat or a miss in the fiscal deficit to GDP ratio on account of the denominator. ICRA does not expect a fiscal slippage over the targeted 4.4 per cent of GDP, as higher-than-budgeted non-tax revenues and likely expenditure savings would provide a buffer against the expected miss on taxes,” said Rahul Agrawal, senior economist, ICRA Ltd.

Latest data by the Controller General of India showed that the fiscal deficit for the first eight months of this financial year increased by 15 per cent compared to the corresponding period last year, even though the total fiscal deficit target is lower by 2.75 per cent this year at ₹15.7 trillion.

In proportion to the budget estimates, the government’s fiscal deficit for the April-November of FY26 widened to ₹9.77 trillion or 62.3 per cent of BE compared to 52.5 per cent of corresponding period of BE FY 25.

“The lower nominal GDP growth has, however, implications for GoI’s gross tax revenues. The relatively lower nominal growth combined with a relatively lower than budgeted buoyancy of 1.07 over the revised estimates of 2024-25 may result in lower RE numbers for government’s gross tax revenue in 2025-26 as compared to the budget estimates,” said DK Srivastava, chief policy advisor, EY India.

Capital expenditure for the first eight months was ₹6.58 trillion, which was 59 per cent of FY26 BE as against 49 per cent in April-November period of last fiscal increasing by 28 per cent on-year for the same period.