Govt may stick to 4.4% fiscal deficit target, restrict market borrowing in H2FY26: CEA

23 Sep 2025 Evaluate

Chief Economic Adviser (CEA) V Anantha Nageswaran has said that the government would stick to its 4.4 per cent fiscal deficit target and restrict market borrowing at the estimated Rs 6.82 lakh crore in the second half of the current fiscal year (H2FY26). The government had announced borrowing Rs 8 lakh crore through dated securities during the April-September period of 2025-26 to fund the revenue gap. The Union government, in consultation with the Reserve Bank of India is expected to announce a borrowing calendar for the second half (October-March) during this week.

Fiscal deficit -- the gap between the government's total revenue and total expenditure -- is estimated to be 4.4 per cent of GDP for FY26 as compared to 4.8 per cent of the GDP revised estimated for the FY25. To fund fiscal deficit, the government resorts to market borrowings. Out of gross market borrowing of Rs 14.82 lakh crore estimated for 2025-26, Rs 8 lakh crore, or 54 per cent, is planned to be borrowed in the first half (H1) through issuance of dated securities, including Rs 10,000 crore of Sovereign Green Bonds (SGrBs). In absolute terms, the fiscal deficit is pegged at Rs 15,68,936 crore for the financial year 2025-26. To finance the fiscal deficit, the net market borrowings from dated securities are estimated at Rs 11.54 lakh crore. The balance financing is expected to come from small savings and other sources.

Nageswaran further said India's FY26 GDP growth will tend towards the upper end of 6.3-6.8 per cent range in FY26, following the GST 2.0 reforms that came effect from September 22, 2025. He said ‘The GST 2.0 is a very significant landmark reform. I am very confident that it will provide a very significant boost to domestic demand. Coming on top to the indirect taxes are the concessions and relief announced as part of the Union Budget. Taking a multiplier effect, these will quite definitely boost the GDP numbers’. He added that the total impact of the multiplier effect due to direct tax relief (income tax cuts) and indirect tax relief (GST rate cuts) on the economy will be more than Rs 2.5 lakh crore, though some other uncertainties may dilute the effect.

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Govt may stick to 4.4% fiscal deficit target, restrict market borrowing in H2FY26: CEA

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