Sharp fiscal correction to help ease debt reduction

Fiscal deficits for FY24 and FY25 set at 5.8% and 5.1%

A savings in capital expenditure, the Centre has further lowered its fiscal deficit target to 5.8% of GDP for FY24 from the Budget estimate of 5.9% and pegged it at 5.1% for FY25, more impressive than what the market expected, in an election year.

IDED BY ROBUST nontax revenues and some The Budget shows the reduction in the fiscal deficit to GDP ratio by 60, 70, and 60 basis points in three consecutive years to reach 4.5% of GDP for FY26 envisioned in the medium-term glide path.

This could boost India's credentials for a sovereign rating upgrade by global rating agencies.

As a result, the Centre announced a reduction in gross borrowing by 8.4% on-year to 14.13 trillion for FY25 which analysts say will cool bond yields further over the coming year. "The higher than expected capex and lower than projected fiscal deficit suggest that the quality of expenditure is going to be healthier," Icra chief economist Aditi Nayar said.