Gujarat’s economy is projected to expand 11.4 per cent year-on-year in FY27, taking the state’s Gross State Domestic Product (GSDP) to ₹33.24 lakh crore, according to the state budget presented in the legislative assembly on Wednesday.
The rebound comes after steady growth moderation since FY22. For the current financial year, FY25, Gujarat’s GSDP at current prices is estimated to grow 10.4 per cent to ₹29.84 lakh crore. The government, in its medium-term fiscal policy statement, presented with the state budget, noted that the state economy has recorded an annualised growth rate of 11.94 per cent over the past 15 years (FY12–FY26) under the 2011-12 base year series.
Manufacturing gains, agriculture share falls
The structure of Gujarat’s economy continues to shift. The share of agriculture in GSDP has declined to 14.2 per cent in FY25 from 17.8 per cent in FY12, while manufacturing’s contribution has risen to 32.8 per cent from 28.4 per cent over the same period. The data underscores Gujarat’s strengthening industrial base even as the farm sector’s relative share narrows.
Expenditure Discipline, Capex Surge
Public expenditure data indicate calibrated fiscal management alongside higher infrastructure outlays. Total expenditure has grown at an annualised rate of 10.82 per cent between FY 12 and revised estimates of FY 26, lower than the GSDP growth rate of 11.94 per cent, suggesting spending discipline relative to economic expansion. At the same time, capital expenditure has accelerated sharply. Capex rose from ₹98,106 crore in FY 25 to ₹1,23,554 crore in FY 26 (RE), marking a 25.94 per cent year-on-year increase. For FY27 (BE), the government has budgeted capital expenditure of ₹1,57,359 crore, underlining a sustained infrastructure push.
Revenue trends & Tax composition
While GSDP has grown at a CAGR of 11.94 per cent between FY12 and FY26 (RE), state taxes have expanded at a slightly lower CAGR of 9.36 per cent over the same period. The government, however, expects faster economic expansion in the coming years, driven by policy reforms, with its own tax revenues continuing to grow healthily. VAT/GST remains the largest contributor to the state’s own tax revenue, accounting for 68.53 per cent of total own tax revenue in FY 26 (RE). VAT/GST collections have grown at an annualised rate of 9.14 per cent between FY12 and FY26 (RE), while land revenue has registered a stronger annualised growth of 10.38 per cent during the same period.
Debt & Fiscal Position
The state’s public debt is expected to rise to ₹4.87 lakh crore in FY27 from ₹4.3 lakh crore (revised estimate) in FY26, marking an increase of over 13 per cent. Public debt as a percentage of GSDP is projected to edge up from 14.42 per cent to 14.65 per cent in FY27. The composition of debt has changed significantly between FY12 and FY25. The share of NSSF loans has fallen sharply to 4.7 per cent from 39.51 per cent, while market loans now account for 83.04 per cent of total public debt, up from 49.83 per cent in FY12.
Central government loans have risen to 6.89 per cent in FY25 from 2.76 per cent in FY22, largely due to borrowings under the Scheme for Special Assistance to States for Capital Investment — a 50-year interest-free loan programme. Gujarat received ₹5,958 crore under the scheme in FY25, accounting for over 10 per cent of its total borrowing of ₹51,253 crore.
Borrowing Costs Decline
Despite rising borrowings, Gujarat’s debt servicing profile has improved. The average cost of debt has declined from 8.88 per cent in FY12 to 7.26 per cent in FY25 and is expected to moderate further to 7.23 per cent in FY26 (as per revised estimates). Interest payments as a percentage of revenue receipts have fallen to 10.72 per cent in FY26 (RE), compared with 15.63 per cent in FY12. The state has diversified its borrowing tenure between two and 12 years, resulting in competitive rates on State Government Securities (SGS).
Fiscal deficit under 2% of GSDP
The government has pegged the fiscal deficit for FY25 at ₹48,965 crore, or 1.81 per cent of GSDP. For FY26 (RE), it is estimated at ₹58,052 crore (1.95 per cent of GSDP), rising to ₹65,519 crore in FY27 (1.97 per cent of GSDP). While absolute deficit and debt levels are rising in line with economic expansion, the ratios remain below 2 per cent of GSDP, signalling continued fiscal consolidation discipline.
Published on February 18, 2026
