Govt Likely To Lower Fiscal Deficit Target In Upcoming Budget: ICRA

ENA Economy 2024-07-17 14:28:45 New Delhi, Jul 17 (KNN) In the forthcoming Union Budget, the Indian government is expected to revise its fiscal deficit target downward to between 4.9 per cent and 5 per cent of GDP for the current financial year, according to economic experts. This adjustment represents a reduction from the 5.1 per cent projection made in the interim Budget presented in February, as reported by PTI. ICRA Chief Economist Aditi Nayar stated, The union government is likely to set a fiscal deficit target at 4.9-5 per cent, lower than projected 5.1 per cent of GDP, without compromising the capital expenditure target of Rs 11.1 lakh crore. This assessment suggests that the government aims to balance fiscal consolidation with continued investment in infrastructure and development projects. Finance Minister Nirmala Sitharaman is scheduled to present the full Budget on July 23, marking her seventh consecutive budget presentation. This budget is anticipated to lay the groundwork for India's ambitious goal of achieving developed nation status by 2047, a vision referred to as Viksit Bharat. The government reported a fiscal deficit of 5.6 per cent of GDP for the previous financial year, indicating a trend towards fiscal consolidation. Nayar further projected that the government might reduce its net market borrowings by Rs 35,000-55,000 crore compared to the interim Budget estimate of Rs 11.8 lakh crore. This reduction could positively impact bond yields and increase demand for government securities, particularly in light of their inclusion in the J.P. Morgan Government Bond Index. Experts suggest that the government may allocate the anticipated additional revenue receipts of Rs 1.2 lakh crore towards both increased spending and fiscal consolidation. There is also speculation about potential income tax relief to stimulate consumption. However, Nayar cautioned that significantly reducing the absolute size of the fiscal deficit might prove challenging over the next 3-4 years. She emphasised that the decline in the fiscal deficit-to-GDP ratio would largely depend on growth in nominal GDP. The government's commitment to maintaining capital expenditure at 3.4 per cent of GDP over the medium term, as indicated in the FY2025 Interim Budget, suggests that further fiscal consolidation would require sustained reduction in the revenue deficit. Nayar also noted the government's recent efforts to bring previously off-budget capital expenditures into the main budget, recommending that this be considered when determining future fiscal consolidation targets. She suggested that the government could aim to further reduce its fiscal deficit target to 4 per cent of GDP over the medium term, from the expected sub-4.5 per cent in FY'26, taking into account these budgetary adjustments. (KNN Bureau) 38621 https://knnindia.co.in/news/newsdetails/economy/govt-likely-to-lower-fiscal-deficit-target-in-upcoming-budget-icra 2024-07-17 14:28:45 knnindia.co.in Govt Likely To Lower Fiscal Deficit Target In Upcoming Budget: ICRA