Centre will meet revised FY26 fiscal deficit target despite extra subsidies, defence spending: Sitharaman

New Delhi: The Centre will meet its revised fiscal deficit target for the current fiscal year despite higher subsidies and defence outlays, finance minister Nirmala Sitharaman told the Lok Sabha on Friday.

The government has sought Parliament’s approval for about ₹2 trillion in net additional spending through supplementary demands for grants.

Replying to the debate on supplementary demands for grants in the lower house, Sitharaman said that the government has earmarked over ₹57,000 crore of the additional spending budget for an Economic Stabilisation Fund.

“It is important to recognise that we have announced ₹57,381.84 crores for economic stabilisation fund,” she said.

The total size of the fund is ₹1 trillion, and the remaining will be met through savings.

The government had in February projected a fiscal deficit of ₹15.58 trillion for FY26 in the revised estimates, accounting for 4.4% of nominal GDP.

The minister’s assurance of sticking to this target comes despite nominal GDP being slightly revised down to ₹345.5 trillion in the second advance estimates released last month.

“India has not had an economic stabilisation fund as such in the past, but we have had funds for oil price stabilisation. The government’s commitment to stick to the fiscal deficit target for FY26 signals it is expecting higher tax and non-tax revenue receipts,” said an economist with a leading consulting firm, who spoke on condition of not being named because of an internal restriction on commenting on the ongoing geopolitical conflict.

Sitharaman said in Lok Sabha amid slogans on the impact of Iran war on LPG, “I wish to reiterate that with the supplementary demand for grants that we have come up with, I do not wish any member of Parliament to wonder if I will be able to reach the fiscal deficit number that I have said while placing the budget for FY26-27 here.”

“We are not going to, in anyway, not fulfil the word given in the budget. I wish to reiterate that the commitment given in this House inclusive of the second supplementary demands will be within the fiscal deficit target presented in this Parliament on 1 February 2026.”

Fiscal reforms post-covid made sure the economy recovered well, she said. "This has enabled us to deal with the economic shocks of various nature without deviating from fiscal consolidation roadmap… the proposed economic stabilisation fund will provide fiscal headroom to India to respond to global headwinds such as the recent crisis – unanticipated supply chain disruption, unexpected shocks to subsectors in Indian economy and any other event that may have significant fiscal implication.”

The minister said the fund was set up as a buffer to deal with risks that cannot be anticipated.

Food, fertilizer subsidies

There will be no shortage of fertilizer subsidy, the minister informed the House, adding that an extra ₹19,230 crore is being provided for the same in the supplementary demands for grants.

Under the food grain subsidy scheme, the PM Garib Kalyan Ann Yojana, an additional ₹23,641 crore is provided, the minister informed.

The minister also said the country has a fertilizer subsidy stocks of 163 lakh tonnes for April. “We have adequate stocks for kharif. For rabi season in December 2026 also, arrangements are being made,” the minister said.

The Lok Sabha passed the second batch of supplementary demands for grants seeking approval for ₹2 trillion in net additional spending this fiscal. Lok Sabha approval was sought for ₹2.81 trillion in gross additional spending, with a portion to be funded through savings under other heads.