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India's fiscal deficit may exceed budgeted target for FY27: BMI
Apr-22-2026

Research firm BMI, a Fitch Solution unit, has said that India's fiscal deficit, the gap between revenue and expenditure, may exceed the budgeted target for current fiscal (FY27) and potentially hit 4.5 per cent of Gross Domestic Product (GDP) as the government's policy response to the ongoing West Asia conflict could put pressure on public finances. It said the Union Budget 2026-27 had projected a fiscal deficit at 4.3 per cent of GDP, lower than the revised estimate of 4.4 per cent of GDP in 2025-26.   

BMI expects the government to introduce policies to redirect critical inputs to key industries, restrain business costs and improve financial support for firms. It also expects the government to consider restrictions on exports of scarce inputs such as helium and sulphur -- used in the manufacturing of semiconductor chips. It said since sulphur is a key ingredient in fertiliser production, the government will strive to minimise disruptions to the agriculture sector, which provides employment to about 43 per cent of the total population of the country.

It further said the government will seek to restrain cost increases for businesses affected by Strait of Hormuz's closure. It said to this end, the government has proposed a Rs 1 lakh crore Economic Stabilisation Fund to bolster India's response to global challenges. BMI estimates this will contribute 0.1 per cent of GDP to fiscal expenditure in 2026-27. It also said the government's past fiscal consolidation efforts reduced expenditure on energy and fertiliser subsidies to around 1.5 per cent of India's GDP in recent years. Given the importance of energy and fertilisers to India's economy, it expects this subsidy amount to rise in FY27.
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