The Crossbill News Desk
India’s fiscal consolidation plans could face fresh challenges after provisional GDP data indicated that the Union government’s debt burden relative to the size of the economy may be higher than previously estimated.
New calculations based on official figures suggest that the Centre’s debt-to-GDP ratio rose in FY26 as nominal economic growth fell short of budget assumptions.
According to calculations cited by Business Standard, the Union government’s debt-to-GDP ratio may have increased to 57.85% in FY26, exceeding the 56.1% estimate presented in the Union Budget.
The figure is based on an estimated government debt stock of Rs 200.35 trillion and a nominal GDP of Rs 346.36 trillion, as reported in the provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. The data showed nominal GDP expanded by 8.9% during FY26.
The newspaper reported that the slippage had “significantly steepened the Centre’s debt consolidation trajectory” towards its goal of reducing the debt-to-GDP ratio to 50% by FY31.
Analysts noted that the higher ratio appears to stem largely from a smaller-than-expected GDP base rather than any substantial increase in government borrowing. The Budget’s revised estimates for FY26 had assumed nominal GDP would reach Rs 357.14 trillion, significantly higher than the figure eventually reported by MoSPI.
According to the report, the lower nominal GDP estimate could also complicate the government’s fiscal arithmetic for FY27, which is built around a nominal GDP projection of about Rs 393 trillion.
India’s nominal GDP would need to grow by roughly 13.5% in FY27 to reach that level. Quoting ICRA Chief Economist Aditi Nayar, the report said economists expect nominal GDP growth to exceed 12 percent in FY27, helped by higher inflation.
The issue comes at a time when fiscal pressures are already emerging. Data from the Controller General of Accounts showed the fiscal deficit widened to Rs 3.62 trillion in April, accounting for 21.4 percent of the full-year target, compared with 11.9 percent a year earlier.
“The nominal GDP-linked complication also comes in a year when the government’s finances are already strained,” the report noted, pointing to the possibility of expenditure overruns and revenue shortfalls amid the conflict in West Asia.
The report said fertiliser subsidy spending could exceed budget estimates by more than Rs 1 trillion in FY27 due to higher energy prices linked to the regional conflict. It also flagged the Centre’s recent reduction in excise duty on petrol and diesel as a potential drag on indirect tax collections.
MoSPI’s provisional estimates released on Friday showed the economy expanded 7.7% in real terms and 8.9% in nominal terms during FY26.
New calculations based on official figures suggest that the Centre’s debt-to-GDP ratio rose in FY26 as nominal economic growth fell short of budget assumptions.
According to calculations cited by Business Standard, the Union government’s debt-to-GDP ratio may have increased to 57.85% in FY26, exceeding the 56.1% estimate presented in the Union Budget.
The figure is based on an estimated government debt stock of Rs 200.35 trillion and a nominal GDP of Rs 346.36 trillion, as reported in the provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. The data showed nominal GDP expanded by 8.9% during FY26.
The newspaper reported that the slippage had “significantly steepened the Centre’s debt consolidation trajectory” towards its goal of reducing the debt-to-GDP ratio to 50% by FY31.
Analysts noted that the higher ratio appears to stem largely from a smaller-than-expected GDP base rather than any substantial increase in government borrowing. The Budget’s revised estimates for FY26 had assumed nominal GDP would reach Rs 357.14 trillion, significantly higher than the figure eventually reported by MoSPI.
According to the report, the lower nominal GDP estimate could also complicate the government’s fiscal arithmetic for FY27, which is built around a nominal GDP projection of about Rs 393 trillion.
India’s nominal GDP would need to grow by roughly 13.5% in FY27 to reach that level. Quoting ICRA Chief Economist Aditi Nayar, the report said economists expect nominal GDP growth to exceed 12 percent in FY27, helped by higher inflation.
The issue comes at a time when fiscal pressures are already emerging. Data from the Controller General of Accounts showed the fiscal deficit widened to Rs 3.62 trillion in April, accounting for 21.4 percent of the full-year target, compared with 11.9 percent a year earlier.
“The nominal GDP-linked complication also comes in a year when the government’s finances are already strained,” the report noted, pointing to the possibility of expenditure overruns and revenue shortfalls amid the conflict in West Asia.
The report said fertiliser subsidy spending could exceed budget estimates by more than Rs 1 trillion in FY27 due to higher energy prices linked to the regional conflict. It also flagged the Centre’s recent reduction in excise duty on petrol and diesel as a potential drag on indirect tax collections.
MoSPI’s provisional estimates released on Friday showed the economy expanded 7.7% in real terms and 8.9% in nominal terms during FY26.
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