The fiscal chapter sets out three linked priorities: predictable devolution to states, a disciplined glide path for deficits, and medium-term debt consolidation. The document notes acceptance of the recommendation to retain the vertical devolution share at 41%, alongside ₹1.4 lakh crore provisioned to states for FY27 as Finance Commission grants (including rural/urban local bodies and disaster management grants).
On consolidation, the central government targets a debt-to-GDP ratio of 50±1% by 2030. Debt-to-GDP is estimated at 55.6% in BE 2026–27 versus 56.1% in RE 2025–26. The fiscal deficit is held at 4.4% of GDP in RE 2025–26 and then nudged down to 4.3% in BE 2026–27, consistent with the stated prudence path.
Explainer Table 1 — Devolution and debt framework
| Parameter | What is stated | Why it matters |
| Vertical share of devolution | Retained at 41% | Predictable state finances |
| FY27 Finance Commission grants | ₹1.4 lakh crore | Supports local bodies + disaster management |
| Debt-to-GDP target | 50±1% by 2030 | Medium-term fiscal anchor |
| Debt-to-GDP estimate | 56.1% (RE 2025–26) → 55.6% (BE 2026–27) | Directional reduction |
Explainer Table 2 — Deficit trend indicators (as % of GDP)
| Year | Fiscal deficit | Revenue deficit | Primary deficit | Effective revenue deficit |
| 2022–23 | 6.50 | 4.00 | 3.00 | 2.80 |
| 2023–24 | 5.52 | 2.51 | 2.00 | 1.51 |
| 2024–25 | 4.81 | 1.68 | 1.38 | 0.88 |
| 2025–26 (RE) | 4.42 | 1.51 | 0.80 | 0.59 |
| 2026–27 (BE) | 4.30 | 1.49 | 0.68 | 0.30 |