The government’s fiscal deficit is forecast to fall to 4.5 percent of GDP or less by the fiscal year 2026, according to an economic survey introduced in Parliament on Monday. “In pursuit of fiscal consolidation through efficient and careful fiscal management, the government remains on the fiscal glide path. The government’s fiscal deficit is predicted to fall to 4.5% of GDP or less by FY26, according to the survey.
This commitment has helped to maintain public debt sustainable, hence keeping sovereign bond rates and spreads under control. All of these variables have worked together to maintain macroeconomic stability and create a foundation for long-term growth.
This is apparent in the declining trend of the macroeconomic vulnerability index, which is calculated by combining India’s fiscal deficit, CAD, and inflation,” it noted. According to the study, despite the worldwide trend of expanding fiscal deficits and increased debt burdens, India has remained committed to fiscal reform.
According to the report, India’s macroeconomic stability will be built around its strong fiscal performance in 2023. The Union Government’s budget deficit has been reduced from 6.4% of GDP in FY23 to 5.6% of GDP in FY24, according to provisional actuals (PA) statistics issued by the Office of the Controller General of Accounts.
Strong growth in direct and indirect taxes due to sustained economic activity and increased compliance resulted in tax revenues exceeding cautious budgetary expectations, according to the poll. Additionally, higher-than-expected non-tax revenue in the form of RBI dividends has impacted revenue receipts. These strong income, along with limited revenue expenditure, resulted in decreased deficits.
“A decomposition of the fiscal deficit over the last few years shows that, as the income deficit narrows, capital outlays account for a bigger share of the fiscal deficit. This implies that the productivity of borrowed resources has increased,” it said.
Earlier in its analysis, SBI research recommended that the government exercise fiscal prudence and continue on the fiscal consolidation path. Fiscal deficit refers to the difference between the government’s total revenue and total spending. It represents the entire amount of money that the government may need to borrow.
In the Interim Budget earlier this year, the administration set a fiscal deficit of 5.1% of GDP for 2024-25. The administration set a fiscal deficit objective for 2023-24. at 5.9% of GDP. Later, it was lowered downward to 5.8%.
The interim budget, presented on February 1, addressed the budgetary demands of the interim period until the establishment of a new administration. The union budget, to be presented by Finance Minister Nirmala Sitharaman on Tuesday, would be the first budget of the Modi 3.0 government. (ANI)