India has consolidated substantially since the pandemic. The general government deficit fell from 13.1 percent of GDP in 2020-21 to 7.2 percent in 2025-26, and the debt from 89.2 to 81.8 percent. The Centre has met its deficit targets each year since 2021-22 and now has adopted a debt anchor. Growth running ahead of interest rates has helped bring debt down, and macroeconomic stability has kept borrowing costs contained. Even so, India’s general government debt is still high and interest payments absorb about a quarter of revenue, the highest share among emerging-market G20 economies. This brief examines India’s past consolidations and what the next phase, anchored on the Centre’s new debt target, will require. Using changes in the cyclically adjusted primary balance, it identifies three consolidation episodes since 1996-97. The 1999-01 and 2004-08 episodes were driven mainly by revenue; the 2011-14 episode relied on spending cuts. The recent fall in the debt ratio has rested largely on growth running ahead of interest rates, but that gap has narrowed every year since 2021-22, and at its current level the primary deficit is too large to stabilise debt. Recent improvements in the fiscal position have also relied on receipts outside the tax system, notably RBI surplus transfers, that may not last. Shortfalls in budgeted receipts have led to in-year cuts in capital outlays, at both the Centre and the state level. Higher fertiliser and fuel costs following the West Asia conflict could erase the improvement projected for 2026-27. GST loses far more to exemptions, reduced rates and exclusions than to non-compliance. India collects about four-fifths of its estimated tax capacity. This brief argues that the next phase of consolidation should rest on broadening the tax base, realistic budgeting, subsidy reform and protecting capital, health and education spending.
