Debt-to-GDP Ratio for FY26 May Have Exceeded Budget Estimate: Report

New Delhi: The Union government's debt-to-GDP ratio may have risen to 57.85% in FY26, above the 56.1% estimated in the Union budget, after India's nominal GDP came in lower than anticipated, according to calculations based on the government's provisional GDP estimates.

The figure, reported by Business Standard, is derived from the government's estimated debt stock of Rs 200.35 trillion and the FY26 nominal GDP estimate of Rs 346.36 trillion released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. The provisional estimates showed nominal GDP grew 8.9% in FY26 to Rs 346.36 trillion.

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.

The higher ratio appears to be driven primarily by a lower GDP denominator rather than an increase in debt. The 2027 Budget's revised estimates for FY26 were based on a nominal GDP projection of Rs 357.14 trillion, substantially above the provisional estimate released 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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