- India's debt-to-GDP ratio is projected to ease to 55.6% in 2026-27 from 56.1% in 2025-26
- The debt-to-GDP ratio assesses government borrowing relative to economic output
- India's government debt is estimated at Rs 196.79 lakh crore by the end of FY26
Finance Minister Nirmala Sitharamana announced that India's debt-to-GDP ratio is estimated to ease to 55.6% for 2026-27, from 56.1% for 2025-26, signalling a gradual improvement in the government's fiscal position in the Budget 2026 announcement on Sunday.
The debt-to-GDP ratio measures total government borrowing as a share of the economy's output and is widely used to assess a country's ability to service its debt. A lower ratio indicates a healthier balance between debt and economic capacity, while a higher ratio points to fiscal stress.
India's debt-to-GDP ratio stood at around 56% in FY26, with total government debt estimated at about Rs 196.79 lakh crore by the end of the financial year. According to reports, the government's medium-term objective is to bring the ratio down to around 50% by 2031.
Economists view the debt-to-GDP ratio as a more comprehensive gauge of fiscal health than the annual fiscal deficit, as it captures the cumulative debt burden rather than just one year's borrowing. A rising ratio can constrain fiscal flexibility, limit the government's ability to respond to economic shocks and push up borrowing costs as investors demand higher risk premiums. It can also crowd out developmental spending as debt servicing takes priority.
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