Budget 2025–26-wl-3495-Union Budget 2025–26: General Government Debt and Fiscal Rules

The surge in global indebtedness, coupled with the suspension of fiscal rules in many countries following the pandemic, has resulted in a rethinking about the design of rule-based fiscal frameworks. As countries across the globe revisit their fiscal rules, union government in India too has made a major revision in the Union Budget 2025–26 in this regard. In its statement of fiscal policy 2025–26, the Government of India has replaced rigid annual numerical targets with a target for debt-to-GDP ratio to be achieved by 2030–31. While this shift brings the necessary flexibility in fiscal operations of the Union government, it remains to be seen if similar flexibility is accorded to the State governments which share a greater responsibility towards general government’s development spending.