Economic Survey FY26 confirms that the Union government remains on track to meet its fiscal deficit target of 4.4% of GDP for FY26. The survey, tabled in Parliament on January 29, 2026, highlights steady fiscal consolidation along with sustained public investment. It says broad trends during the year support confidence in the government’s fiscal path.
Prepared under Chief Economic Advisor V. Anantha Nageswaran, the Economic Survey FY26 notes a sharp rise in capital spending. The share of capex in total central expenditure increased from about 12.5% in FY20 to 22.6% in FY25. Effective capital expenditure as a share of GDP also rose from nearly 2.6% to 4%.
The survey points out that while States face pressure from rising revenue expenditure, the Centre has encouraged capital spending through the Special Assistance to States for Capital Expenditure scheme. As a result, States have maintained capex at around 2.4% of GDP.
Markets have responded positively to fiscal discipline. Sovereign bond yields have declined, and spreads over U.S. bonds have more than halved. Credit rating agencies have also rewarded this approach. S&P upgraded India’s rating to BBB, while CareEdge Global assigned a BBB+ rating.
The fiscal deficit fell from 9.2% of GDP in FY21 to 4.8% in FY25 and now targets 4.4% in FY26, reflecting improved expenditure quality.
