Confederation of Indian Industry advocates prudent fiscal deficit targets for FY 25, 26 – The Tribune-OxBig News Network

The Confederation of Indian Industry (CII) has recommended the government maintain its fiscal deficit target at 4.9 per cent of GDP for FY 2025 and set a target of 4.5 per cent for FY 2026. CII said overly ambitious targets beyond these levels could have a negative impact on economic growth.

Chandrajit Banerjee, the Director General of CII, emphasised the importance of prudent fiscal management for macroeconomic stability, which has been crucial for India’s rapid growth despite a slowing global economy. He said, “The balance between fiscal deficit and fiscal support for growth has been vital in ensuring macroeconomic stability and building resilience amidst global economic uncertainty.”

CII also welcomed the Union Budget 2024-25’s commitment to keeping the fiscal deficit at levels that would help reduce the debt-to-GDP ratio. For the medium term (by 2030-31), CII proposed a glide path that would bring the Central Government’s debt to below 50 per cent of GDP and to below 40 per cent in the long term. Achieving these targets, CII believes, would positively impact India’s sovereign credit rating and help lower interest rates across the economy.

To support long-term fiscal planning, CII recommended the introduction of Fiscal Stability Reporting. This could involve issuing annual reports on fiscal risks under different stress scenarios, along with a long-term outlook for fiscal stability. Such an initiative would help forecast potential economic challenges and opportunities, assessing their impact on the fiscal path. Many countries, including Brazil (10 years) and the UK (50 years), have adopted similar forward-looking fiscal planning measures.