Moving the current tradition of targeting fiscal deficit, Finance Minister Nirmala Sitharaman has prepared a new blueprint to reduce the loan and GDP ratio with the help of the treasury as expected. The 6 -year action plan by FY 2031 aims to bring the loan and GDP ratio within 47.5 to 52 percent, which is at the level of 57.1 percent in FY 25. The budget for FY 26 has been targeted to bring loans and GDP ratio to 56.1 percent and an attempt will be made to bring it down 1 percent every year.
The scope of loan and GDP for the period of FY 27 to FY11 to FY11 to FY11 to FY11 is based on three nominal GDP growth landscape, 10.5 percent and 11 percent. Three loan-GDP ratios such as light, medium and high are targeted on the basis of fiscal strength for each development scenario which the government wants to achieve.
The medium -term fiscal policy cum fiscal policy strategy introduced with the budget states in the statement, “This approach provides flexibility in the operations necessary to deal with the sudden change in the government. Along with this, it is expected to keep the debt burden of the central government stable in a transparent manner.
In his budget speech, Sitharaman said, “Our effort is to maintain the fiscal deficit every year in such a way that the government debt in the proportion of GDP keeps decreasing continuously.” The government aims to bring the fiscal deficit down to 4.4 percent level of GDP in FY 2026, which is a revised 4.8 percent in FY 25. The government had targeted to bring the fiscal deficit below 4.5 percent of GDP by FY 2025 in the budget of FY 22.
The statement said, ‘Keeping in mind the shaking of a major economic utterance and keeping in mind the potential development trends and emerging needs Will try to maintain the debt of the central government to continuously decrease so that the ratio of loan and GDP can be brought to about 50+ – 1 percent by 31 March 2031 (final year of the 16th Finance Commission cycle). It also states that the election of fiscal reinforcement is matched by the government’s concrete efforts to promote fiscal transparency through proper disclosure of borrowing.
According to the statement, ‘The option of loan and GDP ratio in the form of fiscal strength is in line with the current global thinking. It encourages efforts to move towards a more transparent and flexible fiscal standards out of tight annual fiscal goals. It also shows more reliable measures of fiscal performance, as it also shows the effects of previous and existing financial decisions.
Christian D Guzman, senior vice president of Moody’s Ratings, says, “Although the central government is on the way to meet its policy goals, we do not expect sufficient improvement in the ratio of the budget prescribed for loan burden or loan service.”