¨     The central government has announced its highest-ever borrowing plan of ₹17.2 lakh crore for the financial year 2026–27 (FY27), attracting the attention of markets, economists, and those preparing for competitive exams.

¨     This announcement comes with a fiscal deficit target of 4.3% of GDP, indicating continued but gradual fiscal consolidation.
¨     While the government aims to balance development needs with fiscal discipline, such a large borrowing raises crucial questions about debt sustainability, interest rates, and long-term economic stability. Understanding this move is critical for competitive exams and economic awareness.
What the Government Has Announced
¨     The government has projected gross market borrowing of ₹17.2 lakh crore in FY27, higher than the ₹14.8 lakh crore in FY26.
¨     Of this, net market borrowing of ₹11.7 lakh crore will be through dated government securities (G-Secs), while the remaining amount will be raised through small savings and other sources.
¨     The net borrowing in FY26 was budgeted at ₹12.5 lakh crore.
¨     The government also reiterated that the FY26 fiscal deficit target of 4.4% will be met, demonstrating commitment to the stated targets.
Understanding Fiscal Deficit and Borrowing
¨     A fiscal deficit occurs when the government's total expenditure (excluding borrowing) exceeds its total receipts.
¨     To bridge this gap, the government borrows from the market, primarily through dated government securities. • The fiscal deficit for FY27 is projected at 4.3% of GDP, only 0.1 percentage point lower than in FY26.
¨     This indicates that consolidation is continuing, but at a slower pace.
¨     Higher borrowing finances infrastructure, welfare schemes, and development, but it also increases public debt and interest obligations.
Market and Credit Rating Perspective
¨     According to Moody's Ratings, India has demonstrated a clear commitment to fiscal consolidation since the pandemic.
¨     However, Moody's also noted that the mere 0.1% reduction in FY27 represents the slowest pace of consolidation in recent years.
¨     The agency also highlighted that the deficit remains higher than the levels seen during the government's first term.
¨     Such assessments are crucial because credit ratings influence foreign investment, borrowing costs, and global confidence.