World is witnessing trade policy dislocation, says finance ministry
Presence of risks to world economy make medium term fiscal projections difficult, the ministry emphasised
 "World is witnessing trade policy dislocation, says finance ministry")
The finance ministry on Wednesday said the world has witnessed “trade policy dislocation” as well as “escalating conflicts” across West Asia since the presentation of Union Budget 2025-26 (FY26) in February.
The ministry cited the presence of these risks to the world economy for its inability to present a Medium Term Expenditure Framework (MTEF) 2025 under the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. “…The required projections cannot be made with any degree of certainty,” it noted in a statement on half yearly review of the trends in receipts and expenditure in relation to the budget at the end of the financial year 2024-25, tabled in Parliament.
“The Government while presenting the Union Budget for FY 2025-26 had informed Parliament through the Medium-Term Fiscal Policy Statement (MTFPS) and the Fiscal Policy Strategy Statement (FPSS) that rolling targets for FY 2026-27 and FY 2027-28 could not be provided mainly on account of continuing global uncertainty and visible benefits of retaining flexibility in conducting fiscal policy operations,” the statement noted.
“To prepare the MTEF Statement, certain assumptions are made regarding the growth rate of the economy, buoyancy of various taxes, trajectory of non-tax receipts of the Government, etc. These variables are then used to estimate the overall resource position of the Government which in turn is used to make meaningful expenditure projections and rolling targets for the upcoming fiscal years,” it pointed out.
However, the finance ministry said the government remains committed to achieving the glide path of fiscal consolidation.
“Since FY 2021-22, adoption of an operationally flexible fiscal consolidation path has served the country well. India is now set to attain the goal outlined in the Budget for FY 2021-22 and reach fiscal deficit level below 4.5 per cent of GDP in FY 2025-26,” it said. The FY26 Budget has laid down a path for fiscal consolidation for FY 2026-27 to 2030-31.
“Sans any major macro-economic disruptive exogenous shock(s), and while keeping in mind potential growth trends and emergent development needs, the Government would endeavour to keep fiscal deficit in each year (from FY 2026-27 till FY 2030-31) such that the Central Government debt is on declining path to attain a debt to GDP level of about 50±1 per cent by 31st March 2031 (the last year of the 16th Finance Commission cycle),” the finance ministry said in the statement.