As the Union Budget 2026 takes centre stage, three key indicators — the revenue deficit, fiscal deficit and primary deficit — are back in focus. These metrics are closely watched by economists, investors and policymakers, as they reveal the government’s financial health and shape expectations for growth, inflation and future borrowing.
To bridge this gap, the government typically turns to borrowings, divestments and changes in taxation — such as introducing new levies or increasing existing ones. A high revenue deficit often raises concerns about long-term fiscal discipline, since it shows that borrowing is being used to run routine operations rather than build assets.
The fiscal deficit — the excess of total expenditure over total receipts (excluding borrowings) — remains one of the most scrutinised numbers in every Budget. Its size directly influences macroeconomic stability.
A high fiscal deficit can push up inflation, raise the cost of production and even affect the country’s sovereign credit rating. At the same time, governments may consciously choose to widen the deficit during periods of weak demand. Higher spending can stimulate a sluggish economy by giving households and businesses more money to spend and invest.
Primary Deficit
The primary deficit measures the government’s borrowing requirements excluding interest payments on past loans. It is calculated by subtracting interest payments from the fiscal deficit.
A narrowing primary deficit is viewed as a positive sign, reflecting an improvement in fiscal fundamentals. It suggests that while interest payments may remain high, the government’s current spending — excluding these commitments — is better aligned with its income.
As policymakers finalise the numbers for Union Budget 2026, the interplay between these three deficits will help determine how India balances growth priorities with fiscal consolidation in the coming year.
Revenue Deficit
A revenue deficit arises when the government’s revenue expenditure exceeds its revenue receipts. In simple terms, it indicates that the Centre does not have enough income to meet its regular, day-to-day expenses.To bridge this gap, the government typically turns to borrowings, divestments and changes in taxation — such as introducing new levies or increasing existing ones. A high revenue deficit often raises concerns about long-term fiscal discipline, since it shows that borrowing is being used to run routine operations rather than build assets.
Fiscal Deficit
The fiscal deficit — the excess of total expenditure over total receipts (excluding borrowings) — remains one of the most scrutinised numbers in every Budget. Its size directly influences macroeconomic stability.A high fiscal deficit can push up inflation, raise the cost of production and even affect the country’s sovereign credit rating. At the same time, governments may consciously choose to widen the deficit during periods of weak demand. Higher spending can stimulate a sluggish economy by giving households and businesses more money to spend and invest.
Primary Deficit
The primary deficit measures the government’s borrowing requirements excluding interest payments on past loans. It is calculated by subtracting interest payments from the fiscal deficit.A narrowing primary deficit is viewed as a positive sign, reflecting an improvement in fiscal fundamentals. It suggests that while interest payments may remain high, the government’s current spending — excluding these commitments — is better aligned with its income.
As policymakers finalise the numbers for Union Budget 2026, the interplay between these three deficits will help determine how India balances growth priorities with fiscal consolidation in the coming year.
