A marginal increase in food subsidy, despite procurement cost going up every year due to increase in minimum support prices (MSPs) of paddy and wheat, has helped the government in reducing allocation for crucial food, fertiliser and fuel (LPG cylinder). These subsidies have been cut 4.7 per cent to ₹4.3 lakh crore during 2026-27, from an estimated ₹4.1 lakh crore in FY26 (Revised Estimate).
The government’s fiscal health is closely tied to its spending on essential social safety nets, such as agricultural subsidies, rural employment programs, and direct farmer transfers.
Finance Minister Nirmala Sitharaman said that the fiscal deficit in 2026-27 (BE) is estimated to be 4.3 per cent of GDP. “One of the main operational instruments for debt targeting is the fiscal deficit. I am happy to inform this august House that I have fulfilled my commitment made in FY 2021-22 to reduce fiscal deficit below 4.5 per cent of GDP by 2025-26. In RE 2025-26, the fiscal deficit has been estimated at 4.4 per cent of GDP,” she said.
