Bringing down debt will be key focus in 2026-27, says FM Nirmala Sitharaman

New Delhi: Stressing the need for sustained fiscal discipline to support long-term growth, Union Finance Minister Nirmala Sitharaman on Wednesday said reducing debt-to-GDP ratio would be a priority for the Union Government in the next financial year.

The FM also urged the states to focus on lowering their debt. “The Centre has set clear goals for transparency in budget-making, ensuring that fiscal management is visible to all and meets the highest standards of accountability,” Sitharaman said at India Economic Conclave organised by a media-house.

“As a result, we have been able to bring down the debt-to-GDP ratio since the post-Covid period, when it had crossed 60%. It is now on a declining path," she added.

The Centre's debt-to-GDP declined to 57.1% in 2024-25, from a high of 61.4% in 2020-21, as per official data. It is estimated to come down to 56.1% in the current fiscal.

“It is already coming down, but we need to reduce it further, and this will be a core focus in the next financial year,” the FM remarked.

Without naming specific states, Sitharaman said the debt level of some states is cause of concern. "Unless the debt-to-GSDP is managed better and kept within the FRBM limits and the stock of debt which is being accumulating over the years with high rate of interest which many states are unable to service, unless even those are brought down, you will be borrowing to service the loans, you will not be borrowing for developmental expenditure. That's a poor play in the fiscal terrain,” she said.

According to data presented by the Finance Ministry in Rajya Sabha on Tuesday, debt as a ratio of GSDP is estimated to be 35% or more in the current fiscal in at least 11 states.