Govt likely to target fiscal deficit at 4% of GDP by FY26

Published On: Monday, January 18, 2021 | By: Team KnowMyStock

The GOI is likely to lay down a road map in the upcoming Budget to reduce its fiscal deficit to 4 percent of gross domestic product (GDP) by 2025-26. This is necessary because there will be demands for expansionary policies, even in the next couple of years. This implies the government is set to deviate from the long-standing medium-term target of 2.5-3 percent of GDP as prescribed by amendments to the Fiscal Responsibility and Budget Management Act (FRBM). The government had changed the recommendations of the N K Singh Committee on fiscal consolidation and targeted bringing down the fiscal deficit to 3.1 percent of GDP by 2022-23 (FY23). However, to enable widen the fiscal deficit beyond the permissible limit under the present legislation, the government may have to propose an amendment to the FRBM Act in the Finance Bill.

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