Fiscal Consolidation

The dilemma over the date of presentation aside, there is yet another reason why Ms Sitharaman's forthcoming Budget will be treated as a major event of historical significance

S&P upgrades India's sovereign rating citing strong growth, fiscal discipline, and infrastructure push, while warning against policy reversals and subsidy-heavy spending

Amid fiscal consolidation, heavy lifting by central bank to support economy

Public spending on capital expenditure remains a priority due to its strong multiplier effect on economic growth, Finance Minister Nirmala Sitharaman said at the post-Budget press briefing

As Finance Minister Sitharaman has mentioned that the revenue foregone would be Rs 1 trillion, one can assume that it would lead to Rs 70,000 crore of consumption

India Ratings and Research (Ind-Ra) on Monday said the FY26 Budget should focus on a mix of fiscal consolidation roadmap, while boosting consumption demand, and capex spending. The Centre in the FY22 Union Budget had provided a fiscal consolidation glide path till FY26 according to which the fiscal deficit will be brought down to 4.5 per cent of the GDP. "By adhering to the outlined targets, it builds up fiscal credibility which is important for various stakeholders especially investors in gauging the fiscal health of the economy. It also helps in curtailing inflation which has been sticky during FY24-FY25. "This is one of the reasons for weak consumption demand in the economy which has kept private investments in wait-and-watch mode. Thus, measures to stimulate consumption demand in the economy through income tax relief may be announced in the forthcoming budget," Ind-Ra said. Against the backdrop of the past three quarters of growth slowdown, Ind-Ra expects the FY26 Union Budget

India's fiscal conditions will continue to constrain its credit strength in 2025, although tension in US-China relations could benefit the Indian economy, Moody's Ratings said on Wednesday. In its report on Asia Pacific Sovereigns, Moody's Ratings said growth and inflation are levelling out, with strong domestic demand bolstered by modest easing in global and regional financial conditions. But proposed trade restrictions by the US would weaken economic output across the region. "India's fiscal conditions will continue to constrain its credit strength in 2025. We expect only gradual fiscal consolidation, and debt to remain significantly higher than the Baa-rated peer median of around 57 per cent," Moody's said. "Despite gains in revenue in recent years, we also expect debt affordability to remain much weaker than rated peers," it added. It said politics and social unrest pose significant economic and fiscal risks. In APAC, geopolitical risks will persist in 2025, flowing from tensi

A Reserve Bank report on Thursday sounded a note of caution saying sops like farm loan waiver, free power and transport, by states could crowd out their critical resources for social and economic infrastructure. The RBI's 'State Finances: A Study of Budgets of 2024-25', however, said state governments have made commendable progress towards fiscal consolidation by containing their aggregate gross fiscal deficit within 3 per cent of GDP for three consecutive years (2021-22 to 2023-24), while restricting revenue deficit at 0.2 per cent of the GDP in 2022-23 and 2023-24. "This has allowed states to scale up their capital spending and improve the quality of expenditure," the report said. It further said several states have announced sops pertaining to farm loan waiver, free electricity to agriculture and households, free transport, allowances to unemployed youth and monetary assistance to women in their Budget for 2024-25. "Such spending could crowd out the resources available with them

States are allowed to go for a fiscal deficit of 3 per cent of their GSDP and 0.5 per cent relaxation is given in case they pursue power sector reforms

Fiscal consolidation measures such as managing contingent liabilities, improving fiscal transparency, and enhancing the fiscal credibility of SDLs needed to address states' financial challenges

Moody's Ratings notes that the Budget is credit positive

Finance Secretary said the figure of 3% for fiscal deficit does not take into account the specific dynamics of a fast growing economy like India

India Budget 2024-25 News Highlights: By raising LTCG tax to 12.5 per cent and STCG tax to 20 per cent, the overhang for stock markets gets removed

Union Budget 2024 news: The budget prioritises sectors like agriculture, education, and employment generation, broadening the base for economic advancement

EY India said India's economy has shown 'resilience' with GDP expanding by 8.2 per cent in 2023-24 after 9.7 per cent and 7 per cent in the previous two years

Record RBI dividend may guide likely focus on capex, special package

"Our expectation is that the government will look to achieve the 4.5% fiscal deficit target by 2025-26," Jeremy Zook, director - Asia-Pacific sovereigns at Fitch told Reuters in an interview

In the current year, the gross market borrowings are estimated at Rs 15.4 trillion, and the net borrowing at Rs 11.8 trillion - the highest-ever government borrowing programme

Interim Budget: Revenue Secretary Sanjay Malhotra said that the removal of tax old tax disputes is likely to cost the Centre around Rs 3,500 crore

From an equity market perspective, some of the positives appear to be considered in valuations and therefore return expectations from near term perspective should be moderate