Debt-to-GDP over fiscal deficit: Will FM Sitharaman's strategy pay off?

Since the finance minister announced a glide path based on debt-to-GDP ratio to measure fiscal deficit, opinion has been divided on the move since it would also reflect on government borrowings

In 2018, the central government amended the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, in an effort to reduce debt-to-gross domestic product (GDP) ratio to 40 per cent by FY25 and the fiscal deficit to 3 per cent by FY21. However, the Covid-19 pandemic played spoilsport, with India’s fiscal deficit rising from 4.6 per cent of GDP in FY20 to 9.2 per cent in FY21. 

 

The FRBM amendment in 2018 was preceded by the recommendations of the NK Singh-led committee set up in 2016 to chart a new fiscal consolidation roadmap. 

 

Fast forward to 2025, and Finance Minister Nirmala