Fiscal Consolidation on Track
Despite facing a challenging environment, the Centre has successfully kept fiscal consolidation on track, even after providing Rs 1 lakh crore in tax relief to the middle class. Some expenditure compression has also played a crucial role in this achievement. As of now, the fiscal deficit remains the sole operational target for fiscal consolidation.
Revised Fiscal Deficit Target
In the revised estimate for 2024-25, the government has set its fiscal deficit target at 4.8% of GDP, slightly lower than the previous estimate of 4.9%. It is projected to decrease further to 4.4% of GDP in 2025-26.
Budget 2025 Highlights
The budget statement on fiscal policy emphasizes the success of adopting an operationally flexible fiscal consolidation path since FY 2021-22. India is on track to achieve the goal of reducing the fiscal deficit level below 4.5% of GDP by FY 2025-26. The Centre aims to continue this trend, aiming for a debt-to-GDP level of about 50% by March 31, 2031.
Future Fiscal Policy Directions
The fiscal policy will focus on reforms, resilience, and readiness, balancing development priorities with fiscal prudence. This approach is expected to invigorate growth momentum and create necessary fiscal buffers to respond to global and domestic challenges effectively.
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