Long road to fiscal consolidation

Even though India needs large infrastructure investments, the government should have prioritised fiscal consolidation

Union Budget-related commentaries are usually focused on the potential economic and financial market impact during the year. Since the economy has just recovered from an unprecedented shock, which dealt a mighty blow to public finances, it is important to assess medium-term possibilities for government finances and their implications as well. This is also essential because the government did not present medium-term fiscal projections, owing to continued global uncertainty. The government, however, has given itself a target of reducing the fiscal deficit to under 4.5 per cent of gross domestic product (GDP) by 2025-26.

As things stand, the government clearly has a