Finance Minister Nirmala Sitharaman on Friday said the government will stick to its FY26 fiscal deficit target of 4.4% GDP while creating a Rs 1 lakh crore Economic Stabilisation Fund to help the country respond to unexpected global shocks.
The minister emphasised that the additional spending sought through supplementary demands will not affect the fiscal consolidation roadmap. The fiscal deficit for 2025–26 will remain within the Revised Estimates, which are aligned with the Budget Estimates (4.4% of GDP). The minister’s statement assumes importance as it was expected that the fiscal deficit might marginally increase to 4.5% due to the smaller size of the economy following the new GDP series with a new base year.
“The Economic Stabilisation Fund will allow India to respond to global headwinds such as the recent crisis, unexpected supply chain disruptions and shocks to sectors of the economy. In anticipation of what cannot be anticipated, we are creating this fund,” she said, replying to a debate on the second batch of supplementary demands for grants in the Lok Sabha.
On Friday, the Lok Sabha approved the second batch of supplementary demands involving a net additional cash outgo of Rs 2.01 lakh crore through a voice vote amid protests by opposition members who entered the well of the House during the minister’s reply.
The second batch of supplementary demands provides for Rs 1 lakh crore for the creation of the stabilisation fund. Of this, the net cash outgo will be Rs 57,381.84 crore, with the remainder being met through savings from other allocations.
Overall, the combined size of the first and second supplementary demands stands at Rs 4.13 lakh crore. However, Sitharaman clarified that Rs 1.71 lakh crore of this amount represents technical supplementary provisions and does not translate into fresh spending.
She also noted that the Revised Estimates for FY26 place total government expenditure at Rs 49.65 lakh crore, which is lower than the Budget Estimate of Rs 50.65 lakh crore, indicating that spending remains within the original fiscal framework. Fe had reported earlier that there would be substantial savings in government schemes due to the new just-in-time release norms that curb the floating of funds.
In the second supplementary, Rs 30,000 crore has been allocated to clear pending dues under the Mahatma Gandhi National Rural Employment Guarantee Act up to March 31, 2026. Additional funds also include Rs 19,230 crore towards fertiliser subsidies and Rs 23,641 crore for the Pradhan Mantri Garib Kalyan Anna Yojana, along with Rs 41,822 crore for the defence ministry.
“It is ironic that even while I am speaking about how the Government is preparing itself to face unexpected events, including supply chain disruptions and issues related to LPG, the Opposition is not willing to listen to the reply,” the minister said.
Sitharaman assured farmers that there will be no shortage of fertilisers, saying adequate provisions have been made in the supplementary demands to meet demand. She also rejected opposition criticism that supplementary demands indicate poor budgeting, arguing that governments must retain flexibility to respond to unforeseen challenges while maintaining fiscal discipline.
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