The Economic Survey on Thursday said the Centre is on track to achieve its fiscal deficit target of 4.4% in the current financial year. It added that once global macroeconomic uncertainties ease, the government could consider adopting a new Fiscal Responsibility and Budget Management framework, potentially by the end of the Sixteenth Finance Commission period in 2031. 

Govt has succeeded in lowering fiscal deficit 

According to the Economic Survey, the government has fulfilled its commitment to lower the fiscal deficit since the Covid pandemic. “The government has targeted a fiscal deficit of 4.4% for FY26 and is on course to achieve it, thus fulfilling the commitment made in FY21,” it said.   

“It is noteworthy that the government was determined to and succeeded in bringing down the fiscal deficit ratio as promised, despite it not being a legislative target, even while improving the quality of fiscal expenditure with a concurrent emphasis on capital expenditure,” the Survey noted.

“Among other things, the conservative and prudent approach to fiscal management, which enhanced fiscal credibility, led to India’s sovereign rating upgrades by several credit rating agencies in FY26,” it said, while adding, “The central government’s fiscal trajectory stands out for combining consolidation with sustained public investment, earning three sovereign rating upgrades this year. Between FY20 and FY25 (Provisional Actual), the share of capital spending in total central government expenditure increased from about 12.5% to 22.6%, while effective capex as a share of GDP rose from roughly 2.6% to 4.0%.” 

“Based on the broad trends observed during the year, the central government remains well on track to achieve its envisaged fiscal consolidation path, aiming to attain a fiscal deficit target of 4.4% of GDP by FY26. As of November 2025, the Union government’s fiscal deficit stood at 62.3% of the Budget Estimates,” it added.   

Govt can consider returning to FRBM by 2031 

As per the survey, the new fiscal glide path announced in the previous year’s Budget with debt-to-GDP ratio to around 50% by FY31 is good for now given the global uncertainties, but it can consider going back to new FRBM by 2031. “Since the FRBM Act was first enacted in 2003, the 3% target has been achieved only once. This eroded India’s fiscal credibility, and it has taken five years of sustained commitment to fiscal prudence post-Covid to win back the trust of financial markets and credit-rating agencies. It is important to retain that trust,” it said. 

“In this regard, the new fiscal policy framework has announced a debt ratio target of 50±1% by 31st March 2031, which meets the requirements. Once the current target is met and fiscal deficits decline gradually, a new FRBM target may be considered at the end of the Sixteenth Finance Commission period. A return to a rule-based regime will likely be credible and durable if ushered in after a period of lower global macro uncertainty and after debt and/or deficit ratios come meaningfully closer to 50% or 3% of GDP, respectively,” the Survey stated.