India Targets Debt Reduction Amid Fiscal Deficit Narrowing and Spending Challenges

India's fiscal deficit has narrowed significantly from 9.2% of GDP in 2020-21 to 4.4% in 2025-26, with a target of 4.3% in 2026-27. The government aims to reduce the debt-to-GDP ratio to around 55.6% by 2026-27 and further to 50% by 2031. While fiscal consolidation has improved expenditure quality and capital investment, concerns remain over slower consolidation pace, high debt servicing costs, and state-level fiscal stress, highlighting the need for prudent spending at both central and state levels.