Debt MF outlook: Divide portfolio between long- and low-duration funds

The Indian economy requires rate cuts and a supportive monetary policy to sustain growth, which is slowing

Two significant events—the Union Budget of 2025 and the Reserve Bank of India’s (RBI) monetary policy review—have taken place. Let’s examine the outlook for debt mutual funds in their aftermath.

 

Twin boosts: Fiscal consolidation, rate cut

 

The key positive from the Budget is fiscal consolidation by the government. The revised fiscal deficit estimate for 2024-25 stands at 4.8 per cent of gross domestic product (GDP), while the fiscal deficit for 2025-26 is estimated at 4.4 per cent of GDP.

 

“The government has significantly reduced the fiscal deficit in line with its guidance. It has also committed to reducing the debt-to-GDP