With policymakers seeking to promote economic growth by reducing the pace of fiscal consolidation, the Fitch group company, BMI Research in its latest report has revised India’s fiscal deficit forecast to 3.5 percent of gross domestic product (GDP) for the fiscal year 2018-2019 (FY19) as against its earlier estimate of 3.3 percent. It also said that there is room for fiscal slippage as the government seeks to achieve its 7.5 percent growth target.
According to the report, Union Budget for FY19 (April-March) that was presented by Finance Minister Arun Jaitley on February 01, seeks to support growth and job creation at the expense of a slower pace of fiscal consolidation as policymakers aim to achieve a $5 trillion economy by 2025. The report also stated that while the Indian government loosened its central fiscal deficit target for FY19, it did not abandon its fiscal consolidation plans completely, but instead pushed its 3 percent fiscal deficit target back by a year to FY20.
Besides, the government outlined a fiscal deficit target of 3.3 percent of GDP in FY19 as against a revised estimate of 3.5 percent in FY18, indicating some fiscal consolidation, albeit at a slower pace than that recommended under the Fiscal Responsibility and Budget Management (FRBM) framework. Moreover, the FY19 budget saw a further increase in overall expenditure, with the biggest allocation going to transport, rural development, agriculture, education, and healthcare, as the key focus is supporting long term growth.
