New Delhi: Lower-than-expected nominal gross domestic product (GDP) under the new series could make it a tad tougher for the government to realise its targeted fiscal deficit and debt ratios next fiscal, economists said on Friday.
However, the Centre would still be able to cope with these issues over the medium term and contain its debt at the targeted level of 50% (plus-minus 1%) of nominal GDP by the end of FY31, they added. The new series data (with FY23 base year) released on Friday pegs FY26 nominal GDP at ₹345.47 lakh crore, 3.3% lower than what the latest budget has pencilled in on the basis of the old series data. Assuming a 10% nominal expansion for FY27--as projected in the budget--upon the revised base, the targeted fiscal deficit of ₹16.96 lakh crore will now turn out to be 4.46% of GDP, instead of the budgeted 4.31%. Similarly, the targeted fiscal deficit for FY26 would be 4.51% of GDP, against 4.36%, unless deficit in absolute term is curtailed suitably. Meanwhile, the fiscal deficit ratios for FY24 and FY25 would also have to be revised up to 5.7% and almost 4.95% of GDP, respectively, from 5.5% and 4.8%.
Lower nominal GDP would also "have some bearing on the debt consolidation roadmap, with the debt-to-GDP ratio pegged 1.9 percentage points higher at 57.5% for FY27 as against the budgeted target of 55.6%, making the consolidation path unto FY31 relatively steeper than previously estimated", said Aditi Nayar, chief economist at ICRA. DK Pant, chief economist at India Ratings, said: "Given the new series numbers, fiscal consolidation and nominal growth rates have to be stronger than previously assumed to achieve the targets."] "The bigger surprise to us was the downward revision in the nominal GDP base for FY26," Rahul Bajoria and Smriti Mehra, economists at BofAS India, said in a note. This will "push the fiscal deficit and debt estimates modestly higher", they said.
Source Name : Economic Times