India cuts fiscal deficit target to 4.9% for FY ’25

The Indian government on Tuesday announced a lower fiscal deficit target of 4.9 per cent of GDP for the financial year ending March 2025, down from the 5.1 per cent projected in February.

The move, part of the annual budget presented by Finance Minister Nirmala Sitharaman, was aided by a record surplus transfer of 2.11 trillion rupees ($25.3 billion) from the Reserve Bank of India (RBI).

The market reacted negatively to the government’s decision as India’s BSE Sensex and NSE Nifty 50 indices both dropped by approximately 0.7 per cent. Additionally, the rupee reached a record low of 83.7150 against the dollar.

“The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 per cent next year,” Finance Minister Sitharaman said.

Looking ahead, she pledged to maintain fiscal deficits that would gradually reduce the central government’s debt as a percentage of GDP from 2026-27 onwards.

Attribution: Reuters