No question of fiscal deficit going out of control: FM Nirmala Sitharaman

Sitharaman's comment comes at a time when forecasting agencies have pared down their FY26 growth estimates for India amid growing global uncertainty

The government’s debt is being managed well and the fiscal deficit will not slip out of control, Union Finance Minister Nirmala Sitharaman said on Sunday during an interaction with the Indian diaspora in San Francisco.

 

“There is just no question of the fiscal deficit going out of control. If anything, the glide path that was given is being followed very sincerely. This year, in the RE (revised estimates for FY25), we said we would touch 4.8 (per cent of gross domestic product, or GDP). That will be achieved. In the coming year (FY26), we should go below 4.5 (per cent of GDP).”  Sitharaman’s comment comes at a time when forecasting agencies have reduced their FY26 growth estimates for India amid growing global uncertainties, with some economists projecting a shortfall in government revenues.

 

 

The minister said the government’s commitment to fiscal rectitude was shown in the way debt was being managed.

 

“Immediately after Covid, we went past 62 per cent of GDP. Now within four years, we have brought that down to 57.4 per cent of GDP. Within four years, you see clear steps being taken to bring the debt to GDP ratio to an acceptable level. In the July Budget (2024), we had said by 2030, the ratio would come closer to 50 per cent while developed countries have over a 100 per cent ratio.  That’s how we are managing our debt.”

 

Sitharaman said India was in advanced discussions with the United States (US) to finalise a bilateral trade agreement and the first phase of the pact could be signed by fall this year. India is one of the countries that are engaged with the new administration in the US to see how best “we can get a bilateral trade agreement done”, she underlined.

 

“Equally, the priority we give to engage with the government here (US) is more than obvious, with the Prime Minister himself visiting the country in February. You had the commerce and trade minister coming here. I have come here because I also have the IMF (International Monetary Fund) and World Bank meeting. I am scheduled to meet the treasury secretary (Scott Bessant), my counterpart in the US. Even as I talk, I think the US vice-president is in India,” she added. On a question about India’s future global leadership and how the Budget supports the process, Sitharaman talked of India’s progress in areas like semiconductors, renewable energy, including modular nuclear energy, digital infrastructure, and artificial intelligence (AI).

 

Underlining India’s growing role in global knowledge partnerships, she said the World Bank and other global institutions, which are keen on India’s model for digital public infrastructure, skilling in AI, and job creation, were acknowledging the country’s achievements, and India was committed to showcasing them and scaling them up.