By Nikunj Ohri
NEW DELHI (Reuters) – India is ‘fairly’ confident it can meet its target to cut its fiscal deficit by nearly 200 basis points to 4.5% of GDP in the next three years, assuming there is no major global economic shock, a top government official told Reuters on Thursday.
On Wednesday, the government in its 2023/24 budget set a fiscal deficit target of 5.9% of gross domestic product for the coming financial year, down from the current year’s target of 6.4% of GDP. India’s fiscal year starts on April 1.
As economic growth continues and the government aims to cut spending on subsidies, the deficit should be able to fall to 4.5% of GDP by 2025/26, Finance Secretary T.V. Somanathan told Reuters in an interview.
“We are fairly determined to achieve that consolidation … we will make a serious bid to reach the consolidation,” Somanathan said.
India’s Economic Survey forecast 2023/24 growth of 6% to 6.8%, which would make it one of the world’s fastest-growing major economies.
“If growth were to be sustained that would help us in future fiscal consolidation,” Somanathan said.
The fiscal deficit has come down from a record 9.3% of GDP in 2020/21 due to expenses related to the pandemic, but at 6.4% of GDP by the end of the current fiscal year it would still be much higher than its historical range of 4%-4.5%.
Since 2020/21, the Indian government has more than doubled its spending on infrastructure projects including roads, railways and ports to support growth amid weak private investment.
“I certainly think that consolidation is as much dependent on good growth as on expenditure,” Somanathan said.
(Reporting by Nikunj Ohri; Additional reporting by Aftab Ahmed; Editing by Susan Fenton)