Fiscal deficit on track as tax base broadens, spending rationalised

The central government is well on track to achieve its fiscal deficit target of 4.4% in the current fiscal year, Economic Survey 2025-26 said on Thursday, allaying any concerns that a lower-than-expected nominal GDP growth could upset the fiscal glide path.

- Roshan Kishore

Beyond this immediate fiscal concern, the survey also talks in detail about the desired medium term fiscal priorities and lists important achievements in the post-pandemic period. This larger commentary comes in a backdrop of a global environment that is expected to be anywhere between turbulent to catastrophic. The government has already moved to a mediumterm goal of achieving a debt-toGDP ratio of 50 plus minus one percent by 2030-31 in the last budget which is a “deliberate effort to strengthen the overall debt sustainability while preserving policy flexibility in an uncertain global environment”.

The survey's commentary on fiscal policy calls for a “credible consolidation” which preserves the gains made since the pandemic’s disruption without putting an unnecessary squeeze on growth. This is to be achieved by prioritizing quality over quantity, achieving efficiency and synergy in government spending and broadening the direct tax base even as some indirect taxes lose their importance because of larger reform objectives. The survey also makes some radical suggestions to achieve these objectives while acknowledging that some of these things are already work in progress.