India’s FY19 fiscal deficit to come in at 3.5% of GDP, says report | business news | Hindustan Times
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India’s FY19 fiscal deficit to come in at 3.5% of GDP, says report

In his Budget 2018 speech, finance minister Arun Jaitley pushed the government’s 3% fiscal deficit target back by a year to 2019-20.

business Updated: Feb 06, 2018 16:30 IST
Finance Minister Arun Jaitley holds his briefcase as he arrives at the parliament to present the general budget in New Delhi on  February 1, 2018.
Finance Minister Arun Jaitley holds his briefcase as he arrives at the parliament to present the general budget in New Delhi on February 1, 2018. (Arvind Yadav/HT Photo)

India’s fiscal deficit is expected to come in at 3.5% of GDP in financial year 2018-19, 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 financial year 2018-19 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 financial year 2018-19 (April-March) on February 1, 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 USD 5 trillion economy by 2025,” the report added.

The government has 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 2018-2019, it did not abandon its fiscal consolidation plans completely, but instead push its 3% fiscal deficit target back by a year to 2019-20,” the report said.

Budget 2018 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.