In her budget speech, Finance Minister Nirmala Sitharaman has further lowered the fiscal deficit target to 4.9 per cent of the gross domestic product (GDP) for 2024-25, from the Interim Budget’s target of 5.1 per cent of the GDP.
The Interim Budget target was already a significant improvement considering it was 70 basis points lower than previous year’s 5.8 per cent. One basis point is a hundredth of a percentage point.
For 2025-26, the minister maintained the ambitious target of 4.5 per cent, giving a strong signal to the global investors. The Centre has been on a fiscal consolidation path since the deficit ballooned to 9.2 per cent in 2020-21 following the Covid-19 pandemic.
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Before the Lok Sabha elections, credit rating agency S&P Ratings had changed its outlook on India from “stable” to “positive”, which was a cause for celebration for the debt markets in India. Typically, these outlooks have an influence on the flow of foreign direct investments (FDI) into any country.
The ministry of finance has kept its expenditure on welfare allocations and consumption side measures in check wherever possible, and was expected to continue to do so given the inclusion of Indian government bonds into the JP Morgan Emerging Markets Bond Index.
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