India FY19 fiscal deficit to come in at 3.5% of GDP: BMI

  • India’s fiscal deficit is expected to come in at 3.5% of GDP in FY19, as policymakers seek to promote economic growth by reducing the pace of fiscal consolidation, says a report.
  • According to the report by BMI Research, a unit of Fitch Group, there is room for fiscal slippage as the government seeks to achieve its 7.5% growth target. “We are therefore revising our forecast for the FY19 fiscal deficit to come in at 3.5% of GDP, from 3.3% previously,” BMI Research said in a note.
  • “The Indian government released its Union Budget for FY19 (April-March) on 1 Feb 18, which we believe seeks to support growth and job creation at the expense of a slower pace of fiscal consolidation as policymakers aim to achieve a USD5tr economy by 2025,” the report added.
  • The government outlined a fiscal deficit target of 3.3% of GDP in 2018-19 as against a revised estimate of 3.5% in 2017-18, indicating some fiscal consolidation, albeit at a slower pace than that recommended under the Fiscal Responsibility and Budget Management (FRBM) framework.
  • “While the Indian government loosened its central fiscal deficit target for FY2018/2019, it did not abandon its fiscal consolidation plans completely, but instead push its 3% fiscal deficit target back by a year to FY20,” the report said.
  • The FY19 budget saw a further increase in overall expenditure, with the biggest allocation going to transport, rural development, agriculture, education, and healthcare, as the key focus is supporting long term growth.

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