Goldman Sachs analysts answer 5 investor questions before Union Budget
fiscal deficit targets, consolidation efforts, spending priorities, among others, as markets keenly observe how India’s fiscal policymakers plan to navigate a cyclical growth slowdown and elevated public debt.
The first question investors are asking, according to Goldman Sachs, is whether the government will meet its FY25 fiscal deficit target of 4.9% of GDP. The brokerage said the answer to that is yes. Higher income tax collections and increased dividends from the Reserve Bank of India (RBI) and state-owned enterprises are expected to offset shortfalls in corporate taxes and excise duties. Lower-than-budgeted capital expenditure further supports the government’s ability to stay on track despite slower nominal GDP growth.
“How much fiscal consolidation is likely in FY26?” Goldman Sachs said it believes the government will target a fiscal deficit between 4.4% and 4.6% of GDP. This aligns with the broader strategy to stabilize public debt, which remains higher than most emerging market peers. Fiscal consolidation will rely on continued buoyancy in direct tax revenues and careful management of current expenditures, including reducing subsidies, the brokerage said.
“Why is fiscal consolidation important?” Fiscal consolidation is essential, Goldman Sachs noted, as India’s public debt remains significantly higher than many emerging market peers. While the general government debt is projected to reduce to below 80% of GDP by FY30, this depends on maintaining nominal GDP growth of around 11% and limiting fiscal
