Fiscal prudence restoring room for counter-cyclical policy: Shaktikanta Das

India's fiscal discipline and multiple structural strengths are creating a powerful growth multiplier, restoring policy headroom and boosting global confidence, says Shaktikanta Das

India’s multiple strengths are creating a multiplier effect, generating an unprecedented growth tailwind. At the same time, the country’s commitment to fiscal prudence is restoring headroom for future counter-cyclical policies and helping keep public debt sustainable, Shaktikanta Das, second principal secretary to the Prime Minister, said on Friday. He was delivering the inaugural “Bibek Debroy Memorial Lecture” on “Indian Economy: A Story of Rising Credibility”.

 

“Fiscal consolidation is progressing well, with the central government’s gross fiscal deficit falling from 9.2 per cent in 2020-21 to 4.8 per cent in 2024-25… The general government gross debt-to-GDP (gross domestic product) ratio declined to 81.6 per cent in 2024-25 from a peak of 88.4 per cent in 2020-21, during the Covid-19 pandemic. The International Monetary Fund (IMF) has projected it to decline further to 76.9 per cent in 2030-31,” Das said. 

 

From FY27, India will shift to the debt-to-GDP ratio as its primary fiscal anchor, moving away from using the fiscal deficit as the operational target. Under the new glide path, the Centre aims to bring the debt-to-GDP ratio down to 50 per cent by FY31, with a permitted deviation of one percentage point on either side.

 

Highlighting that India is projected to contribute around 18 per cent to global GDP growth in FY26, Das said the outcomes were not accidental, but the result of prudent policies and resilient buffers built over time. “The current and also the expected macroeconomic and financial sector conditions in India are inspiring trust and credibility.”

 

On how he sees India 10 years from now, Das said the country would have a young workforce highly skilled in digital tools. He envisaged seamless transactions and innovation on world-class digital infrastructure, with a larger share of economic activity becoming formalised. He also said Indian-led innovations in artificial intelligence (AI), health and space would drive productivity gains.

 

“This is a picture of an economy speeding ahead on multiple cylinders. This multiplicative effect can be expected to accelerate the pace of our economic growth in the coming decade.”

 

Das said India is uniquely placed, with multiple strengths — youthful demographics, digital public infrastructure (DPI), deepening financial inclusion, and technological and artificial intelligence (AI) potential — coming together in what he called a “historic confluence” and creating an unprecedented growth tailwind. “When combined, they reinforce one another, creating a multiplier effect on growth and development.”

 

The former governor of the Reserve Bank of India (RBI) said the net effect of DPI had been a sharp increase in efficiency and a deepening of financial inclusion. “In a real sense, digital infrastructure has become India’s new soft power with export potential. This not only helps those countries but also opens new markets for Indian fintech and information technology companies.”

 

Das said India’s “demographic dividend” gives it a major growth advantage, as a rising share of productive workers supporting fewer dependants can boost economic output and savings. “At the same time, it is clearly understood that a demographic dividend cannot be on autopilot; it must be steered and its potential imaginatively harnessed,” he cautioned.

 

Against the backdrop of broader geoeconomic fragmentation and an increasingly ineffective multilateral order, Das said India stood for a cooperative, rules-based global system and was proactively forging partnerships and strategies to secure its national interest in a world where power was more diffused. “We, of course, acknowledge that the multilateral system must be revitalised, even as we adapt to new alignments.”

 

Highlighting India’s strategic shift towards self-reliance, Das said atmanirbharta was not being isolationist, but a strategy to build core capabilities and resilience. “Economic atmanirbharta means developing the capacity to produce critical goods and technologies at home and reducing overreliance on foreign sources. Atmanirbharta has two complementary dimensions — economic self-reliance and geopolitical autonomy.”

 

Das said India was at an inflexion point, with shifting geopolitical winds and trade policies reshaping the global economic order. “Traditional multilateralism, once a cornerstone of global governance, is under severe strain. It is increasingly being sidelined by geopolitical rivalries, protectionism and fragmentation. Key international institutions are struggling to deliver on their mandates. Institutions, once the bedrock of the rules-based system, are underperforming in their core mandates.”