Centre Aims to Cut Debt-to-GDP to 55% by FY27, Signals Calibrated Fiscal Consolidation

• Centre targets reducing debt-to-GDP ratio to 54.5-55% by FY27, down from 56.1% in FY26.
• This move signifies a calibrated approach to fiscal consolidation, with a final decision pending FY26 GDP estimates.
• Debt-to-GDP ratio is now the primary fiscal anchor, aiming for 50% by FY31, replacing fiscal deficit.
• IMF advises more ambitious debt targets, including state liabilities, for faster consolidation.
• CareEdge Ratings projects FY27 fiscal deficit at 4.2-4.3%, with debt ratio reaching 50% by FY31 under 10.7% nominal GDP growth.

Why It Matters: India's Centre plans a calibrated reduction in its debt-to-GDP ratio to 55% by FY27, making it the key fiscal anchor.