Budget 2025: Centre pegs FY26 fiscal deficit target at 4.4%
What's the story
Finance Minister Nirmala Sitharaman has pegged the fiscal deficit target for the financial year 2025-26 at 4.4%.
The move comes in line with the government's promise to bring down the budget gap below 4.5% by 2026, as per the Fiscal Responsibility and Budget Management Act.
The current fiscal deficit target has been revised downward to 4.8%, from an earlier estimate of 4.9%.
Fiscal roadmap
Government's fiscal strategy amid economic slowdown
Despite calls for tax relief measures from the middle class, the government has stuck to its fiscal prudence roadmap.
For the financial year ending on March 31, the budget gap target has been reduced to 4.8%.
This is likely attributed to reduced spending on planned capital investments and a larger-than-expected central bank dividend.
Economic outlook
Fiscal deficit and economic growth projections
Industry body Confederation of Indian Industry (CII) has urged the government to stick to its fiscal deficit targets, warning that overly aggressive targets could hurt India's economic growth.
Economists have also expressed concerns over the impact of these targets on economic growth.
They suggest a cautious approach as India's FY25 fiscal deficit calculations may be impacted due to an expected nominal growth rate of 9.6%, lower than the budgeted projection of 10.5%.
Borrowing strategy
India's borrowing plans and GDP growth
The government intends to borrow a gross of ₹14.82 lakh crore from the debt market in the next fiscal year, after a gross borrowing of ₹14.01 lakh crore in the current financial year.
India's GDP is tipped to grow by 6.4% in FY25, a four-year low and a major drop from last year's growth rate of 8.2%.
This is according to the government's first advance estimates.