Fiscal Deficit Pegged at 4.3% of GDP, Capex Raised to ₹12.2 Lakh Crore in Union Budget 2026

New Delhi:
Finance Minister Nirmala Sitharaman on Sunday pegged India’s fiscal deficit for the financial year 2026–27 at 4.3 per cent of Gross Domestic Product (GDP), reaffirming the government’s commitment to fiscal consolidation while continuing to support economic growth. Presenting the Union Budget 2026 in the Lok Sabha, Sitharaman said the estimate aligns with the Centre’s roadmap to bring the fiscal deficit below 4.5 per cent by 2025–26.

The Finance Minister announced a capital expenditure (capex) outlay of ₹12.2 lakh crore for 2026–27, marking a significant increase from ₹11.2 lakh crore allocated in the current financial year. The enhanced capex underscores the government’s continued focus on infrastructure creation as a key driver of economic expansion and employment generation.

Highlighting the government’s debt management strategy, Sitharaman said the debt-to-GDP ratio is projected at 55.6 per cent in 2026–27, marginally lower than 56.1 per cent in 2025–26. She noted that a declining debt ratio would gradually free up resources for priority sectors by reducing interest outgo.

“The government has been delivering on its fiscal commitments consistently without compromising on social needs,” Sitharaman said. She added that the Centre remains on track to achieve a 50 per cent debt-to-GDP ratio by 2030–31, as outlined in earlier budgets. “Lower debt over time helps free up money for important sectors by reducing interest payments,” she explained.

The Finance Minister also said she had fulfilled her commitment made in 2021–22 to reduce the fiscal deficit below 4.5 per cent by 2025–26. The revised estimate for fiscal deficit in 2025–26 stands at 4.4 per cent of GDP, while the budget estimate for 2026–27 has been set at 4.3 per cent.

Infrastructure, Aviation and Skill Development Push

Reiterating the government’s emphasis on balanced regional development, Sitharaman said the Centre would continue to support Tier-2 and Tier-3 cities through infrastructure-led growth. She announced plans to set up a risk guarantee fund for the infrastructure sector and a new scheme to improve construction and infrastructure equipment, aimed at boosting domestic manufacturing.

In a major boost to the aviation and defence sectors, the Finance Minister announced basic customs duty exemptions on raw materials and component parts used in the manufacturing, maintenance and repair of civilian and defence aircraft. Incentives for indigenisation of seaplane manufacturing and subsidies for seaplane operations were also announced.

The Budget also proposed support for professional institutions such as the Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI) to introduce short-term modular courses for skill development.

Tax Reforms and Compliance Measures

On the taxation front, Sitharaman announced a simplification of Tax Deducted at Source (TDS) procedures for property transactions involving non-residents. Resident buyers will now be able to deduct and deposit TDS using a PAN-based challan, eliminating the requirement for a Tax Deduction Account Number (TAN).

She also announced a one-time six-month foreign asset disclosure scheme to address compliance issues faced by students, young professionals, expatriate employees and non-resident Indians. Under the scheme, limited immunity from penalty and prosecution will be available on payment of prescribed tax, fee or penalty, depending on the category of disclosure.

Union Budget 2026: New Income Tax Act from April 1, No Change in Slabs; Buybacks to Be Taxed as Capital Gains

Further relief was announced through a sharp reduction in Tax Collected at Source (TCS). TCS on overseas tour programme packages has been cut to 2 per cent without any threshold, while TCS on education and medical remittances under the Liberalised Remittance Scheme (LRS) has been reduced from 5 per cent to 2 per cent.

Reforms Over Rhetoric

Calling Union Budget 2026 a reform-oriented exercise, Sitharaman said the government has chosen the path of “reforms over rhetoric” and reiterated its commitment to building a Viksit Bharat. This marks her ninth consecutive Budget, bringing her closer to former Prime Minister Morarji Desai’s record of presenting 10 Union Budgets.

The Economic Survey, tabled earlier, projected strong growth for India’s civil aviation, ports and shipping sectors, supported by rising demand and sustained infrastructure expansion, reinforcing the Budget’s emphasis on long-term growth anchored in fiscal discipline.