Govt sets 4.9% deficit target on fiscal correction path

EVEN though political imperatives vastly dominated the first Budget of the PM Modi-led NDA government's third term, Finance Minister Nirmala Sitharaman has walked the talk on her commitment to fiscal prudencemostly due to the whopping 2.11 trillion (2.11 lakh cr) windfall received from the Reserve Bankand has lowered the fiscal deficit target more than anticipated to 4.9% for this year and to 4.5% for the next.

- BENN KOCHUVEEDAN

She has walked the fiscal correction path despite expanding the Budget size by a full 1.2 percentage points over the interim budget and 7 percentage points from FY24.

Many expect the fiscal consolidation this year and the next will lead to a sovereign rating upgrade next fiscal-from BBB- with stable outlook to a BBB.

The interim Budget had set a fiscal deficit target of 5.1% but at that time the North Bloc had no hint that the RBI would be surprising everyone with a massive surplus of ₹2.11 trillion for fiscal 2024. Two other enablers are the spike in tax revenue and higher dividend payouts providing more fiscal space.