Govt changes stance on fiscal consolidation, prioritises debt reduction

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

The Modi government 3.0 committed itself to bringing down the fiscal deficit, which is an excess of expenditure over revenues, to below 4.5 per cent of gross domestic product (GDP) next financial year, but did not specify the target after that year.

On the other hand, Finance Minister Nirmala Sitharaman stated in her latest Budget speech: “From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the Central government debt will be on a declining path as percentage of GDP.”
 

Till then, the Centre has been announcing fiscal deficit targets along