Government's Fiscal Discipline Earns Global Ratings Boost

The latest Economic Survey highlights the government's achievement in fiscal consolidation, reducing the fiscal deficit to 4.4% of GDP. This commitment has led to sovereign rating upgrades. Notably, capital expenditure increased significantly, buoying economic growth and impacting state-level financial dynamics.

The government is making significant strides in meeting its fiscal deficit target of 4.4% of GDP for the financial year 2025-26. The Economic Survey 2025-26, presented in Parliament, highlights the central government's successful fiscal consolidation journey, coupled with sustained public investment, earning it three sovereign rating upgrades this year.

From FY20 to FY25, the central government's capital spending has increased from 12.5% to 22.6% of total expenditure. Effective capital expenditure as a share of GDP rose from 2.6% to 4%. Meanwhile, the central government, through initiatives such as Special Assistance to States for Capital Expenditure/Investment (SASCI), has incentivized states to maintain capital expenditure around 2.4% of GDP.

With the Union government's fiscal deficit standing at 62.3% of the Budget Estimates as of November 2025, markets have responded positively, evident in lower sovereign bond yields. Credit ratings agencies, including S&P Ratings and CareEdge Global, have upgraded India's fiscal rating, recognizing its robust economic performance and fiscal prudence.