Hard choices

Fiscal flexibility is a must but it won't substitute for subsidy reform

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THE CENTRE'S MOVE to adopt the debt-to-GDP ratio as its primary fiscal anchor offers greater room to manage public finances without abandoning the commitment to consolidation. A debt-based framework allows temporary deviations while keeping the longerterm trajectory intact, useful when tax revenues are under pressure. Despite a likely 3.5-4% shortfall in gross tax collections, the Centre may still meet its fiscal deficit target of 4.4% of GDP for 2025-26.This, however, should not be mistaken for an easing of the fiscal challenge. From 2026-27, the burden will shift decisively to expenditure discipline if central debt is to continue to fall as a share of GDP.