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New Fiscal Approach
February 19 , 2025
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- Indian government has announced that it will replace the fiscal deficit target with the debt-to-GDP ratio as the primary fiscal anchor from FY 2026-27.
- It aims to ensure fiscal sustainability, enhance transparency, and provide greater flexibility in managing public finances.
- The debt-to-GDP ratio measures the share of a country's national debt in relation to its Gross Domestic Product (GDP).
- It serves as a reliable indicator of fiscal health, capturing both past and present borrowing trends.
- The government has set a long-term target of reducing the central government’s debt-GDP ratio to 50±1% by March 31, 2031.
- The fiscal deficit target for FY 2024-25 is estimated at 4.8% of GDP, lower than the original target of 4.9%.
- For FY 2025-26, the government has projected a further reduction to 4.4% of GDP.
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