Budget 2025: Govt's new fiscal consolidation roadmap to cut debt to 50% of GDP
fiscal consolidation road map to bring down its debt to 50% (plus-minus 1%) of gross domestic product (GDP) by March 2031 from an estimated 57.1% now. This means it wants to cut its debt faster between FY27 and FY31 than in the previous five years.
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With this, the government will move away from the framework of targeting fiscal deficit annually to another where debt reduction will be the primary anchor of its financial management from FY27, according to Saturday’s budget announcements.
The debt cut would be done in a way that it would preserve macro-economic stability in an uncertain global environment while leaving enough resources to maintain growth push and welfare spending.
The Centre has budgeted to cut its debt to 56.1% of GDP by FY26 after the pandemic-induced spike to 61.4% in FY21. Before the pandemic, its debt was 52.4% of GDP and it’s estimated to touch 57.1% this fiscal.
The statements of fiscal policy, a part of the budget documents, say the government has factored in potential GDP growth trends and various degrees of fiscal calibrations to arrive at the new debt ratio target.
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