India’s Union Budget for 2025 signals steady fiscal consolidation and reinforces a positive outlook for the country’s sovereign credit ratings, according to a recent report by S&P Global Ratings. The government has projected a fiscal deficit of 4.8% of GDP for the year ending March 31, 2025, slightly lower than the earlier estimate of 4.9% presented in the Union Budget on February 1.

Looking ahead to fiscal 2026, India has set an even more ambitious target, aiming for a fiscal deficit of 4.4%. This aligns with the government’s commitment to maintaining financial discipline while pursuing sustainable growth.

Despite adjustments to income tax thresholds and a gradual return to normal economic conditions, India is on track to meet its fiscal targets, as per S&P Global’s analysis. The government’s robust financial position is backed by strong dividends from the Reserve Bank of India and efficient management of capital expenditures.

The report also notes that India’s fiscal discipline is expected to improve over time, with state government deficits gradually reducing in the years to come.

The Union Budget for fiscal 2026 is designed to stimulate domestic demand and foster economic growth. Tax reductions for households are expected to increase consumer spending power, while the government continues to focus on investment-led expansion and agricultural reforms. This proactive approach aims to strengthen India’s economic resilience and accelerate long-term growth.

S&P Global projects that India’s real GDP will grow by 6.7% in fiscal 2025 and 6.8% in fiscal 2026. These growth rates position India ahead of many of its global peers, with continued revenue growth despite the recent tax adjustments. Capital investment remains a key priority, with the government allocating 3.1% of GDP to infrastructure and development projects, reinforcing its commitment to strengthening the nation’s economic foundation.

As supply chain conditions improve and the general elections conclude, the execution of infrastructure projects is expected to become more efficient, further supporting India’s economic growth.

Looking beyond fiscal 2026, the government has announced that it will transition its fiscal performance framework from deficit targets to the debt-to-GDP ratio starting in fiscal 2027. This shift aims to further enhance India’s financial stability and long-term resilience.

– IANS