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Budget 2023 | Market won’t be able to digest fiscal deficit target above 6%, says Morgan Stanley chief economist

Morgan Stanley expects fiscal deficit to be 5.9% of the GDP in FY24 against the estimated 6.4% for FY23, says Chief India Economist Upasana Chachra

January 25, 2023 / 12:24 PM IST

As all eyes are on Budget 2023, the last full Budget of the Modi government ahead of the 2024 general elections, Morgan Stanley expects the fiscal deficit to be 5.9 percent of the GDP in FY24 against 6.4 percent estimated for FY23.

Anything above 6 percent would be difficult for the market to digest, said Upasana Chachra, Chief India Economist, Morgan Stanley, to Moneycontrol.

“There is a need to consolidate the fiscal deficit. The starting point of 6.4 percent is already so elevated that markets will not like it if there is any further slippage. Our estimation of 5.9 percent is a gradual consolidation path. 6 percent or anything above 6 will be a tad negative for markets,” she said.

The fiscal deficit is the shortfall in a government's income compared with its spending. It is calculated as a percentage of the gross domestic product (GDP).