FY25 fiscal deficit target likely at 5.2%
Financial Express Mumbai|January 03, 2024
To further rein in revenue expenditure-GDP ratio
PRASANTA SAHU
  • GOVT MAY STICK TO GLIDE PATH

WITH BUOYANT REVENUES likely ensuring that the 5.9% fiscal deficit target is met in the current financial year, the Centre may target to bring it down to 5.2% in FY25, while sticking to the medium-term glide path for 4.5% deficit by FY26.

However, this would entail compression of the revenue deficit, more sedate growth in capital expenditure than what was seen in the FY23 and FY24 budget estimates, as well as aggressive disinvestment, sources said.

Sticking to the glide path is necessary for India to curb general government debt (GGD) and prevent it from rising again.

Responding to the International Monetary Fund's (IMF) forecast of India's GGD overshooting 100% of the gross domestic product (GDP) under a worst-case scenario by FY28, the finance ministry has recently said that the Centre is "on track to achieve its stated fiscal consolidation target" of reducing fiscal deficit to below 4.5% by FY26.

While the Union government may try to maintain the capex at around 3% of GDP in FY25 from 3.3% budgeted in FY24, the revenue expenditure could be compressed to below 11% from 11.6% in FY24 to accommodate a 70-basis point reduction in fiscal deficit, the sources added.

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