What the fiscal deficit means for you

The fiscal deficit is the difference between what the government earns and what it spends. When the government spends more than it earns, it borrows money — adding to the country's debt. For FY 2025-26, the government's fiscal deficit target is 4.9% of GDP, down from 5.1% in the previous fiscal year.

Why does it matter?

• Higher borrowing: The government borrows from banks, leaving less money for businesses
• Higher taxes: The government may need to raise taxes to cover the deficit
• Inflation: Too much borrowing can fuel inflation

What the government is doing

The government aims to reduce the fiscal deficit to 4.5% by 2026. This means cutting spending where possible and finding new sources of revenue.

Source

Ministry of Finance, Union Budget documents. Figures reflect the most recent budget estimates as of July 2026.