Fiscal deficit for FY27 likely to be around 4.2-4.3%, say Economists
Economists expect fiscal deficit for fiscal year 2026-27 likely to be pegged between 4.2 and 4.3 per cent of GDP (Gross Domestic Products). For the same, net borrowing could be in the range of ₹11.1 lakh crore to ₹11.5 lakh crore with upward bias.
Finance Minister Nirmla Sitharaman will present her ninth successive Union Budget on February 1.
“We expect Centre’s fiscal deficit to consolidate further to 4.2 per cent of GDP in FY27 from 4.4 per cent in FY26, benefiting from higher nominal GDP growth and prudent expenditure allocation,” said Aastha Gudwani, India Chief Economist at Barclays. Fiscal deficit is gap between income and expenditure and filled by borrowing through dated securities popularly known as G-Sec. We estimate net borrowing at ₹11.1 trillion (₹11.1 lakh crore),” she said.
According to data from Controller General of Accounts, with net tax revenue registering de-growth of over 3 per cent and capital expenditure surging over 28 per cent, fiscal deficit widened to over 62 per cent of the Budget Estimates during April-November period of 2025-26. However, experts do not see fiscal deficit breaching the estimates as projected in the Union Budget of FY26.
In a report authored by its Chief Economist Rajni Sinha, CareEdge noted that centre’s tax revenue has shown a weak performance so far in FY26. We estimate the FY26 gross tax collections to see a shortfall of ₹3 lakh crore. Non-tax collections have been healthy this fiscal year aided by higher RBI dividend. Non-tax revenues are expected to overshoot the budgeted amount by ₹30,000 crore in FY26.
Non-debt capital receipts target (which includes disinvestment) to fall short by ₹20,000 crore in FY26. Revenue expenditure growth was subdued while capex logged healthy growth so far in FY26. “We expect fiscal deficit to GDP to be contained at 4.4 per cent in FY26,” it said while adding that fiscal deficit likely to be budgeted at 4.2-4.3 perf cent in FY27.
The government has consistently increased capital expenditure in the budget and this year; it is likely to be raised further. A report by CRISIL said that Budgetary capex increased at 24.5% on average between fiscals 2021 and 2024, higher than the 10 per cent in the pre-pandemic period (fiscals 2016 to 2020) and moderated to average 11.3 per cent in fiscals 2025 and 2026. “The budgetary share of capex in GDP though could remain intact in fiscal 2027,” it said.
Public capex is increasingly budget-led, reducing reliance on the central public sector enterprise (CPSE)-led investment Budgetary capex used to be almost as large as the CPSE-led capex in the pre-pandemic period, but is now more than three times the latter. “Policy efforts need to move beyond direct budgetary support; the shortfall on budgeted capex underscores the need to encourage private investment,” the report said.
Adding to this, CareEdge said that FY26 capex target (₹11.21 lakh crore) likely to be met. “Capex projected to grow by 10 per cent, reaching ₹12.3 lakh crore in FY27,” it said while adding that it expects gross borrowing to be in the range of ₹16-17 lakh crore and net borrowing likely at ₹11.5-12 lakh crore.
Published on January 23, 2026
