The government may make a big announcement in the budget regarding the fiscal deficit.
On the basis of rising revenues, the government may reduce the fiscal deficit target for the current financial year to 4.9-5.0 per cent of gross domestic product (GDP) in the Budget 2024 to be presented next week. While presenting the interim budget in February this year, the government had estimated the fiscal deficit for the financial year 2024-25 to be 5.1 per cent of GDP. Let us also tell you what kind of statement has come from the rating agency ICRA.
can reduce the target
ICRA Ratings chief economist Aditi Nair said the central government can reduce the fiscal deficit estimate from 5.1 per cent to 4.9-5 per cent without compromising on the capital expenditure target of Rs 11.1 lakh crore. Finance Minister Nirmala Sitharaman will present the full budget for fiscal year 2024-25 on July 23. This will be her seventh consecutive budget. The government had achieved the fiscal deficit target of 5.6 per cent of GDP in the financial year 2023-24.
How much is debt likely to be reduced?
Nair said there is also a strong possibility of a decline in net market borrowings to Rs 35,000-55,000 crore for the current financial year as compared to the provisional budget estimate of Rs 11.8 lakh crore. This will boost demand for government securities due to their inclusion in the JPMorgan government bond index and will also bode well for yields.
The government can make this decision.
He said the incremental revenue of Rs 1.2 lakh crore can be split for increased revenue expenditure and fiscal consolidation. He said the government can also use it to promote consumption by giving some income tax exemption. Nair said it would be very difficult to reduce the overall size of fiscal deficit in the next three to four years as the decline in fiscal deficit-GDP ratio would largely depend on GDP growth at current prices.
