Amid growing strains, Centre bets on discipline to rein in the fisc

Mint. They argue that the Centre’s recent record of meeting deficit targets provides enough credibility and momentum to navigate the next phase of consolidation.“The discipline built over the past few years gives us room to navigate the current volatility without losing sight of the medium-term path,” said one of the persons mentioned above, who spoke under the condition of anonymity.According to this official, the Centre expects to end FY26 with a fiscal deficit of about 4.3% of GDP, slightly better than the 4.4% target, lifted by stronger dividends from state-run financial institutions and banks, a hefty transfer from the Reserve Bank of India (RBI), and buoyant non-tax revenues.The second official acknowledged near-term turbulence but maintained it does not derail the trajectory.“If revenues remain broadly stable and we keep our capital spending disciplined and purposeful, the medium-term trajectory stays intact,” the official above said.Recent reports indicate the Centre will likely limit fiscal deficit to 4.1-4.2% in FY27, keeping it aligned with the glide path to the FY31 debt goal.The central government’s debt stood at 57.1% of nominal GDP in FY25, according to FY26 union budget documents, which proposed a shift to debt-to-GDP targeting.

In the pandemic year of FY21, it was at 61.4% of GDP.A key source of fiscal comfort is a large revenue windfall.The FY26 Budget projected ₹2.56 trillion in dividends from the RBI and public-sector financial institutions. Receipts now appear set to surpass that estimate, offering “an unexpected fiscal cushion,” the National Institute of Public Finance and Policy (NIPFP) said in its July report titled “Record RBI Dividend: A Windfall, Not a Fiscal Panacea”.The RBI’s ₹2.69 trillion