Apex business chamber CII on Thursday proposed a four-pronged fiscal strategy ahead of the Union Budget 2026-27 that includes debt stability, fiscal transparency, revenue mobilisation and expenditure efficiency.
According to a CII statement, at the core of the roadmap is adherence to the government’s debt glide path targeting 50 per cent (plus or minus 1 per cent) of GDP by FY31. Maintaining Central debt at roughly 54.5 per cent of GDP and the fiscal deficit at 4.2 per cent of GDP in FY27 will preserve macro credibility while supporting growth. Strengthening public finances, however, must extend beyond the Centre to States and Urban Local Bodies (ULBs), whose fiscal positions increasingly shape overall debt dynamics and the durability of macroeconomic stability.
Second, to improve predictability and reinforce institutional credibility, CII recommends reviving the Medium-Term Fiscal Framework with a rolling 3-5 year roadmap for revenue, expenditure and debt. Third, revenue mobilisation remains central to long-term fiscal sustainability. India’s tax-to-GDP ratio at 17.5 per cent (centre and state combined) remains below that of major emerging economies.
“To finance the developmental needs of the country, India needs to increase its tax-GDP ratio. Leveraging the data from India’s world-class digital infrastructure could help detect tax evasion and expand tax base,” CII director general Chandrajit Banerjee said.
Greater use of digital and AI-based tools should be leveraged to expand the tax base through seamless data exchange between GST, income tax, and digital payment systems. Linking tax returns with high-value transactions and deploying advanced analytics can enable real-time detection of evasion while lowering compliance costs, the statement said.
To unlock value from public assets, government should announce a three-year privatisation pipeline of Public Sector Enterprises (PSEs) in the non-strategic sectors as announced in the ‘Strategic Disinvestment Policy, CII further stated.
Fourth, expenditure management, particularly subsidy reform, forms the other pillar of the strategy. Public Distribution System (PDS), covering 813 million people or 57 per cent of the population, faces challenges of outdated data and leakages. Updating beneficiary lists using the latest Household Consumption Expenditure Survey (2023–24), narrowing coverage to the bottom 15 per cent, and shifting towards cash or voucher-based transfers can enhance efficiency while also promoting dietary diversification, the statement said.
Similarly, fertiliser subsidies, which accounts for 39 per cent of total central subsidies, should transition to a Direct Benefit Transfer (DBT) model to curb misuse and promote balanced fertiliser use. Issuing the DBT amount or fertiliser coupons before sowing can address farmers’ concerns about upfront expenses.
Centrally Sponsored Schemes (CSS), which constitute 11 per cent of Central expenditure, also need to be consolidated to reduce fragmentation. Prioritising high-impact areas such as education, health, skilling, and climate resilience, while leveraging digital tools for monitoring, can yield better outcomes and fiscal savings, the statement said.
CII also suggests encouraging states to obtain ratings from at least two reputed rating agencies for State Development Loans (SDLs) and linking a portion of central capital expenditure assistance to such ratings and disclosures would incentivise prudence.
Besides, CII has proposed a Systematic Modernisation and Resource Transformation (SMART) Cities Enablement Mission anchored in a National Digital Urban Platform to build capacity in municipal finance, governance, and digital service delivery. A Fiscal Health Index for ULBs, modelled on NITI Aayog’s index for states, would allow benchmarking, transparency, and reform-linked incentives, creating a virtuous cycle of improved finances and better service delivery.
