Fiscal Consolidation Set on Cruise Control

Glide path may take FY25 deficit to 4.7-4.8%, less than the budgeted estimate

- Rhik Kundu & Subhash Narayan

India may record a fiscal deficit for FY25 at 4.7-4.8% of GDP, below the budgeted estimate of 4.9%, marking yet another step towards fiscal consolidation.

The revision is expected to be primarily driven by lower expenditure, notably on planned capital investments, along with higher-than-anticipated dividends from the Reserve Bank of India (RBI), two people aware of the matter said.

"Continuing on the path of fiscal consolidation is a major focus of the government," one of the two people cited above said on the condition of anonymity. "For FY26, the plan is to keep the fiscal deficit within the target of 4.5%, as per the glide path. The actual fiscal deficit targeted for FY26 could be slightly lower," the person mentioned above said.

Fiscal deficit refers to the shortfall between a government's income and expenditure and is expressed as a percentage of gross domestic product or GDP.