Finance Minister Nirmala Sitharaman in Lok Sabha
on Monday. (ANI)
A day after presenting the Union Budget 2026-27 in Parliament, Finance Minister Nirmala Sitharaman said on Monday that growth will continue to be the government’s priority as it moves along the fiscal consolidation path, adding that a sharper reduction in the fiscal deficit could have been opted for, but a choice was made to focus on infrastructure spending as a tool for sustaining growth.
Speaking to reporters, Sitharaman also said that disinvestment and asset monetisation would set the tone for revenue generation.
“Below 4.5% was my aim (for fiscal deficit). I have reached 4.4% (for FY26) and I am targeting 4.3% of GDP (for FY27)…we could have brought it down to 4%, but we are comfortable at 4.3%. The fiscal deficit depends on each year’s situation, with growth being the priority,” Sitharaman said.
The Finance Minister said the government has not compressed spending to ensure fiscal consolidation. “We are focusing on the debt-to-GDP ratio, but that doesn’t mean we are overlooking the fiscal deficit as a percentage of GDP. We are looking to bring it down while creating assets,” she said.
Speaking more broadly on public finances, Sitharaman said the government is looking at keeping debt at meaningful levels, not just for the Centre but the States too. She said the Centre would have to “keep nudging” the States when it comes to fiscal discipline.
The Centre has shifted to debt-to-GDP ratio as the fiscal anchor, with the Budget fixing the target for FY27 at 55.6%, while States don’t have a similar debt-based fiscal framework.
Asked about the slow tax revenue growth and the future financial strain from the implementation of the Eighth Pay Commission in FY28, the Finance Minister said disinvestment should “set the tone for revenue generation”. “Asset monetisation will also happen. Also, we are considering doing more public float from CPSEs (central public sector enterprises). That doesn’t mean that we will not focus on the tax side. We need to widen the tax base. The revenue estimates (for FY27) are realistic,” she said.
On the hike in securities transaction tax (STT) on futures & options (F&O) trade, Sitharaman said it has been done to deter speculative derivative trading. “We have only touched the F&O segment, which is highly speculative. I have received calls from many parents saying their children are losing money, and seeking government intervention. The STT hike in F&O will act as a deterrence,” she said, adding that there would be no more government action on STT, except notifying the Budget proposal to hike it.
The Budget announced an increase in STT on futures contracts to 0.05% from 0.02%. STT on options premium and the exercising of these options is proposed to be raised to 0.15% from 0.1% and 0.125%, respectively. According to a report by the Securities and Exchange Board of India, over 90% of retail investors lose money while trading in F&Os, with the regulator previously taking steps to reduce retail trading volumes in the segment.
On the series of Customs duty tweaks undertaken in the Budget, along with the sops for labour-intensive sectors such as textiles, leather and footwear, Sitharaman said the US tariffs did not influence the decisions. “We have been making changes in Customs in every Budget for a while now, and we have continued the same in this Budget. These steps are part of a larger scheme to help Indian citizens and businesses,” she said.
Further, commenting on the external front, she said the government knew the rupee’s exchange rate would be a concern and it has kept in touch with the Reserve Bank of India on the issue.
Referring to the Budget proposal to create “champion SMEs”, Sitharaman said the focus would largely be on medium-sized enterprises, but small ones wouldn’t be ignored. “We can’t allow small enterprises to remain small. But medium enterprises fear becoming big because they think they will lose their advantages on turning big,” she said.
