MC EXCLUSIVE No room for fiscal easing: EAC-PM Chairman sees 55% debt-to-GDP by FY27

S Mahendra Dev said that he is optimistic about India’s growth story.

• Government to stick to fiscal consolidation, aiming for 55% debt-to-GDP by FY27
• Fiscal deficit target for FY26 set at 4.4% of GDP, debt-to-GDP at 56.1%
• Per capita income expected to double in six years, reaching Rs 5,000-5,500

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There is no room for fiscal easing, and the government is expected to stick to its fiscal consolidation roadmap for next year, S Mahendra Dev, Chairman, Prime Minister’s Economic Advisory Council said. He says the central government will aim for a debt-to-GDP target of 55 percent in FY27.

"For the next fiscal year, we (the government) have to go to 55% (debt-to-GDP ratio), if we have to reach the 50 percent mark by FY31," Mahendra Dev told Moneycontrol in an exclusive interview. "That’s the goal, and the government will achieve it."

For the current financial year, the EAC-PM Chairman expects the Centre to stick to its goal of 4.4 percent fiscal deficit, as a percentage of GDP. He also sees the target of debt-to-GDP ratio bet met at 56.1 percent, for FY26.

A senior finance ministry official had told Moneycontrol earlier that the government will stick to 4.4 percent (of GDP) target of fiscal deficit this year, even though some expenditure will have to be "managed".

For FY27, officials expect Budget to peg the nominal GDP between 10-10.5 percent, and the fiscal deficit at 4.1-4.2 percent of the GDP.

Mahendra Dev expects real GDP growth in FY27 to be between 6.5-7 percent, which is lower than 7.4 percent growth pegged by first advance estimate for current financial year. "A higher from FY26, will pull down growth in FY27," said Mahendra Dev.

Meanwhile, on per capita income, the EAC-PM Chairman said that in the next six years, it’s likely to double to Rs 5,000-5,500.

"In the long run, we need to grow at 7-8 percent, and that depends on several sources," he said.

"One is human capital -- skills, education, health, these are the ones which we need to focus on. Second is, labour intensive manufacturing sector. And third is, increasing women participation in workforce. The rates are lower now about 35%, while the world average is 50%," Mahendra Dev noted.

The EAC-PM Chairman also pointed out to the structural transformation that is needed to transfer workers from agriculture to manufacturing and services, which would lead to 7-8% growth on a sustained basis.

"India has 46% of working population in agriculture -- which is 15% of GDP. So that unless we shift the workers to manufacturing and services with skills, education and other things, then we can't achieve higher growth," he added.

Mahendra Dev also said that he is optimistic about India’s growth story, because of the several areas that are of priority. "The central government has been doing lot of things to improve ease of doing business."

"If you see the structural reforms in the last 10 years, I think lot of things have been done, including IBC and then RERA. So that has improved some things. But as I kept kept on saying, states also important in this journey. They also have to participate at the ground level, efficiency improvement."