India has been growing rapidly amidst a slowing global economy. Prudent fiscal management for macroeconomic stability has been pivotal to this growth, according to CIIs Chandrajit Banerjee while elaborating on the CII suggestions for the forthcoming Union Budget. 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 Mr Banerjee.
Looking at the next years budget, CII has suggested sticking to the fiscal deficit target of 4.9 per cent of GDP for FY 25 and a target of 4.5 percent for 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 Governments debt to below 50 per cent of GDP in the medium term (by 2030-31), and below 40 per cent of GDP in the long term, CII has suggested. Such an explicit target would have a positive impact on Indias sovereign credit rating, and further on the interest rates in the economy in general.
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, the industry body suggested.
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