Fiscal consolidation set on cruise control
Subscribe to enjoy similar stories. India may record a fiscal deficit for FY25 at 4.7-4.8% of GDP, below the budgeted estimate of 4.9%, marking yet another step towards fiscal consolidation. The revision is expected to be primarily driven by lower expenditure, notably on planned capital investments, along with higher-than-anticipated dividends from the Reserve Bank of India (RBI), two people aware of the matter said.
"Continuing on the path of fiscal consolidation is a major focus of the government," one of the two people cited above said on the condition of anonymity. "For FY26, the plan is to keep the fiscal deficit within the target of 4.5%, as per the glide path. The actual fiscal deficit targeted for FY26 could be slightly lower," the person mentioned above said.
Fiscal deficit refers to the shortfall between a government's income and expenditure and is expressed as a percentage of gross domestic product or GDP. A higher fiscal deficit raises debt and debt servicing, which strains the economy and risks devaluing the currency and impacting private investments. Also read | Centre to better medium term target for fiscal deficit The Centre has committed to the fiscal consolidation roadmap outlined in the FY22, aiming to reduce the fiscal deficit to below 4.5% of GDP by FY26.
India’s GDP growth slowed to 5.4% in the September quarter, the worst in nearly two years. This was largely due to uneven performance across sectors, with a decline in private consumption growth and government spending offsetting a rural recovery. During the September quarter, government final consumption expenditure (GFCE), a proxy for government investment, grew 4.4%, swinging from a decline of 0.24% in the June quarter marked by disruptions in
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