Fiscal glide path 'sincerely followed', will achieve 4.5 percent deficit target, says FM Sitharaman

"There is just no question of the fiscal deficit going out of control," said FM Sitharaman at a community gathering held in San Francisco, California.

Finance Minister Nirmala Sitharaman, during his US visit, has highlighted Centre’s sustained commitment to bridge to fiscal deficit by achieving the 4.7 percent target in the revised estimates for FY25, which will be further brought down to below 4.5 percent in the current fiscal.

“The glide path that was given has been very sincerely followed. This year (FY25), in the RE (revised estimate) we said we’ll touch 4.8 percent, and what was said in the RE is actually going to be achieved,” FM Sitharaman said during her interaction with the Indian diaspora in San Francisco, USA over the weekend.

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“In the coming year (FY26), we should reach below 4.5 percent,” the finance minister added. The Union Budget for FY26 has pegged the fiscal deficit as a ratio of GDP at 4.4 percent.

“This is just not a statement, it’s also shown in the way we’re managing our debt. Immediately after Covid-19, our debt position was such that we went over 62 percent to the GDP. Now, within four years, we’ve brought that down to 57.4 percent,” the FM said.

“So, within four years you see clear steps being taken to bring the debt-to-GDP number to an acceptable level. And in the July 2024 Budget, we’d clearly said that by 2030, the Debt-to-GDP will come closer to 50%,” said the FM, adding that even well-developed countries have over a debt to GDP ratio of over 100%.

Sitharaman added that during Covid-19, because of the lockdown, India’s fiscal deficit as a ratio of GDP had ‘rocketed-up’, but immediately after that, the government came out with a clear signal as to how it wants to manage the deficit.

“We gave ourselves a year-by-year target, and said by FY26 our deficit will come below 4.5 percent. That’s exactly what we’ve been following without fail, each year,” FM added.

Will India be able to achieve the goals it has set for lowering fiscal deficit, and will it manage its finances prudently? If you ask the Prime Minister Modi’s government, the answer will be more than ‘affirmative’, said the FM.

“He (PM Modi) is somebody who is very conscious that money has to be spent, particularly for the needy, but every taxpayer paisa will have to go to the right cause, be spent properly, and you should get the ‘bang for the buck’,” the FM said.

Even as CM Gujarat, PM Modi had followed this principle, and as PM, he is running the government on it. “Therefore, there is just no question of the fiscal deficit going out of control,” the FM said. In February, during her Union Budget speech, Sitharaman said the Centre - from FY27 onwards - will target a fiscal deficit that will bring down its debt-to-GDP ratio in the 49-51 percent range by 2030-31.

"Sans any major macro-economic disruptive exogenous shock(s), and while keeping in mind potential growth trends and emergent development needs, the government would endeavour to keep fiscal deficit in each year (from FY 2026-27 till FY 2030-31) such that the Central Government debt is on declining path to attain a debt to GDP level of about 51 percent, plus or minus 1 percent, by March 31, 2031," the Budget documents had said.