NEW DELHI: North Block is expected to lower its fiscal deficit target meaningfully in FY25, in line with the post-Covid consolidation roadmap, but the Centre’s gross debt sales will likely remain at this FY’s record levels despite New Delhi expectedly slowing the pace of investments in capital assets.
A slower pace of capital expenditure – after three years of a firm push in that area – may give the Centre the room to bring its fiscal deficit target down by 50-60 basis points to a range of 5.3-5.4% of GDP in FY25 from 5.9% pencilled in this year. One basis point is a hundredth of a percentage point.
Gross market borrowing, which represents the actual supply of government bonds hitting the market, is seen at ₹15.3 lakh crore in FY25, the median of estimates provided by 11 banks, rating agencies and research houses to ET showed.
In the current financial year, the government has projected its gross market borrowing at ₹15.4 lakh crore, an all-time high. The net borrowing is expected at ₹11.7 lakh crore, a shade lower than ₹11.8 lakh crore for the current financial year, the estimates showed.
HSBC’s economists, who estimated the gross borrowing at ₹15.2 lakh crore for FY25, said that figure represented 4.6% of GDP, down from 5.2% in the current fiscal year. They assume 10.6% nominal GDP growth for the next fiscal year.
As a share of GDP, the borrowing is declining. Indian authorities have emphasised the declining trajectory of debt-to GDP ratio with multilateral agencies and rating firms that flagged potential risks from debt levels.
In FY23, general government debt-to-GDP was at around 81%, down from 88% in FY21, the Centre recently said. In 2018, the figure was at 70.4%. The government, which on February 1 will announce the interim Budget for the next financial year, is committed to bringing down its fiscal deficit target to a level lower than 4.5% of GDP by FY26.
On the gross borrowing front, it is the massive pile of government bonds up for redemption in the next fiscal year that will keep the absolute numbers elevated, the reduction in the fiscal deficit notwithstanding.
Source: The Economic Times
The post Govt May Prune FY25 Fiscal Gap Target To 5.3-5.4% On Slower Capex first appeared on Latest India news, analysis and reports on IPA Newspack.
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