New Delhi [India], March 3 : Despite a downward revision in nominal GDP following a change in the base year, India's overall fiscal dynamics remain very comfortable, with the fiscal deficit contained at 63 per cent of the revised estimates (RE) during April-January FY26, according to a report by Union Bank of India.
On the statistical front, the report highlighted that with the GDP base year revised to 2022-23 from 2011-12, nominal GDP levels have been adjusted.
Nominal GDP for FY26, as per the second advance estimate, is now placed at Rs 347 lakh crore, around Rs 10 lakh crore lower compared to the first advance estimate using the old base.
The report said "overall fiscal dynamics remain very comfortable despite downward revision in nominal GDP".
The lower nominal GDP poses an upside risk of around 10-15 basis points in the fiscal deficit as a percentage of GDP for FY26, against the 4.4 per cent budgeted level, assuming receipts and expenditure targets under the revised estimates are met.
However, the report said that with expenditure trends lagging the RE target and a possibility of an upside surprise from tax numbers, the central government is likely to comfortably achieve its revised fiscal deficit target of 4.4 per cent of GDP in FY26.
In absolute terms, India's fiscal deficit for April-January FY26 stood at Rs 9.81 lakh crore, or 63 per cent of the revised estimates, compared to Rs 11.70 lakh crore, or 74.5 per cent of the RE, in the corresponding period last year.
The report noted that receipts have outperformed expenditure so far. Net tax revenue target achieved stands at 78 per cent of the revised target, leaving only 22 per cent to be met in the remaining two months of the financial year, which appears achievable.
On the expenditure side, spending stands at 74 per cent of the RE, with Rs 12.75 lakh crore yet to be spent in the remaining two months. This indicates that there is scope for expenditure rationalisation going forward.
The Union Budget for FY2026-27 has reiterated the government's commitment to fiscal consolidation, with a target to reduce the fiscal deficit to 4.3 per cent of GDP in FY2026-27 from 4.4 per cent in FY2026 (RE).
While central finances remain on track, the report added that sustained fiscal consolidation will depend on coordinated capital expenditure execution and revenue mobilisation at both the central and state levels.
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