Setting the stage for India's sustained economic growth

The full Budget for FY25 signals policy continuity and retains focus on fiscal consolidation, a central tenet of the previous government.

- ZARIN DARUWALA

It also underscores the government's key focus areas which are fiscal prudence, job creation, infrastructure capital expenditure (capex), and simplification of the tax regime.

The fiscal deficit for FY25 was pegged at 4.9 per cent, well below the 5.1 per cent target presented in the Interim Budget in February 2024. The government has judiciously used available fiscal headroom from the higher-thanexpected RBI dividend and strong tax collections to increase expenditure in key sectors such as agriculture and labour, while simultaneously accelerating fiscal consolidation. Further, the government has also laid out a credible plan to achieve an even lower fiscal deficit of 4.5 per cent of GDP by FY26. The projected decrease in government borrowing, combined with the ongoing inflows related to India's bond index inclusion, is positive for fixed-income markets and will help reduce borrowing costs across the economy. Reining in the fiscal deficit also augurs well for a sovereign rating upgrade.