NEW DELHI: The Union government is committed to pursuing the glide path of fiscal consolidation, as announced in Budget for FY22, and to attain a level of fiscal deficit “lower than 4.5%” of GDP by FY26, the finance ministry said.
Going forward, the thrust will be on improving the quality of public spending, while at the same time, strengthening the social security net for the poor and needy. “This approach would help further strengthen the nation’s macro-economic fundamentals and ensure overall financial stability,” the ministry said.
The comments were part of the ministry’s statement on “Half Yearly Review of the Trends in Receipts and Expenditure” in relation to the Budget at the end of the first Half of the Financial Year 2024-25’.
The Union Budget for the upcoming financial year, FY26, will be presented in the Parliament on February 1, 2025. For the current financial year, the government has pegged a fiscal deficit target of 4.9% as a percentage of GDP. But analysts say the actual figure could be slightly lower due to low spending on capex.
The ministry further said that the Budget for FY25 was presented in the backdrop of global uncertainties caused by the wars in Europe and the Middle East.
“India’s sound macroeconomic fundamentals have cushioned the country from the vagaries afflicting the global economy. It has also helped the nation pursue growth with fiscal consolidation,” the ministry said. “As a result, India retains its pride of place as one of the fastest growing economies in the world. However, risks to growth still remain,” it said.
However, since the presentation of the Union Budget for FY 2024-25 (Regular) in July 2024, global headwinds and associated risks are “yet to abate”, it said. “The global situation has become even gloomier due to further escalation of conflict among a set of countries.”
Therefore, given the prevailing global economic and security environment, it is necessary for the government to retain a fair degree of “flexibility” in conducting its fiscal policy so as to be able to respond to any fallout from adverse global events, said the ministry.
In April-October, the fiscal deficit, in absolute terms, stood at Rs 7.5 lakh crore, 6.7% lower than the corresponding period of last year. As per the statement, in H1FY25, the fiscal deficit stood at 29.4% of Budget estimate (BE), lower than 39.3% in H1FY24. In H1FY21, the fiscal deficit (as % of BE) stood at 114.8%.
Source: The Financial Express
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