India’s fiscal deficit glide path under the FRBM Act has been repeatedly reset since the pandemic. Examine the consolidation roadmap, the role of the proposed debt-anchor, and the structural risks that threaten the 4.4% target.

Introduction:

Union Budget 2025-26 pegs the Centre's fiscal deficit at 4.4% of GDP, down from the pandemic peak of 9.2% in 2020-21, yet still above the FRBM Act 2003 anchor of 3%. The FRBM glide path has been reset thrice since 2020, and the Government has now adopted a debt-to-GDP anchor as the new fiscal yardstick, replacing the deficit-led rule recommended by the N.K. Singh Committee (2017).

Consolidation roadmap: The medium-term framework targets Centre debt of 50% of GDP by 2030-31 (vs 56% in 2024-25, Economic Survey 2024-25). The Government plans to compress fiscal deficit below 4.5% from 2025-26 and use a public-debt trajectory as the future anchor, aligning with N.K. Singh's Centre-40%, States-20%, General-60% architecture.

Composition risks: Capital expenditure has surged to ₹11.21 lakh crore (Budget 2025-26), but revenue stickiness persists — food, fertiliser and petroleum subsidies absorbed ₹4.1 lakh crore in 2024-25. Off-budget borrowings via NHAI, FCI and PSU bonds, flagged by CAG Report No. 20 of 2022, distort the headline deficit and weaken transparency under FRBM Section 7.

State and federal pressures: RBI's State Finances 2024-25 report places combined state deficit at 3.2% of GDP; the OPS reversal in five states risks crowding out capex. The 16th Finance Commission window (2026-31) must rebalance vertical devolution while protecting fiscal prudence.

Way forward:

The Ministry of Finance should operationalise an independent Fiscal Council under FRBM Section 7A, publish a binding debt-trajectory by Budget 2026-27, and enforce off-budget disclosure under PFMS, anchoring 50% Centre debt by 2030-31.