NEW DELHI: Amidst the growing voices for a less aggressive fiscal consolidation road map, industry body Confederation of Indian Industry (CII) has suggested sticking to the fiscal deficit target of 4.9% of GDP for FY25 and a target of 4.5% FY26. However, CII has also pointed out that overly aggressive targets beyond the ones mentioned could adversely affect growth.
CII has also welcomed the announcement in the Union Budget 2024-25 to keep the fiscal deficit at levels that help reduce the debt to GDP ratio. In preparation for this, the forthcoming budget could lay out a glide path to bring the Central Government’s debt to below 50% of GDP in the medium term (by 2030-31), and below 40% of GDP in the long term, CII has suggested.
“Such an explicit target would have a positive impact on India’s sovereign credit rating, and further on the interest rates in the economy in general,” said the industry body in a press statement. To aid longer term fiscal planning, the government should consider instituting Fiscal Stability Reporting.
This could include issuing annual reports on fiscal risks under different stress scenarios and the outlook for fiscal stability. The exercise will help forecast potential economic headwinds or tailwinds and assess their impact on the fiscal path. “India has been growing rapidly amidst a slowing global economy.
Prudent fiscal management for macroeconomic stability has been pivotal to this growth,” said Chandrajit Banerjee, Director General, CII. “The fiscal management has maintained the perfect balance between the fiscal deficit and fiscal support to growth. This has provided macroeconomic stability to the economy and helped build resilience in an environment of great global economic uncertainty,” added Banerjee.