CII Urges Govt To Stick To Fiscal Deficit Target

New Delhi: Industry body CII has suggested the government to stick to the fiscal deficit target of 4.9 per cent of GDP for 2024-25 and 4.5 per cent for 2025-26, cautioning that “overly aggressive targets” beyond these could adversely affect India’s economic growth.

“India has been growing rapidly amidst a slowing global economy. Prudent fiscal management for macroeconomic stability has been pivotal to this growth,” said Chandrajit Banerjee, Director General, CII, elaborating on suggestions for the forthcoming Union Budget. CII also highlighted the announcement in the Union Budget 2024-25 to keep the fiscal deficit at levels that help reduce the debt-to-GDP ratio.

In preparation for this, the forthcoming budget could lay out a glide path to bring the central government’s debt to below 50 per cent of GDP in the medium term (by 2030-31), and below 40 per cent of GDP in the long term, CII has suggested. Such an explicit target will have a positive impact on India’s sovereign credit rating and further on the interest rates in the economy, the Confederation of Indian Industry (CII) stated.

“To aid longer-term fiscal planning, the government should consider instituting Fiscal Stability Reporting. This could include issuing annual reports on fiscal risks under different stress scenarios and the outlook for fiscal stability. The exercise will help forecast potential economic headwinds or tailwinds and assess their impact on the fiscal path,” it said. The reporting can also include long-term (10-25 years) forecasting of fiscal positions, accounting for the impact of factors like economic growth, technological change, climate change, demographic changes, etc.