India will see challenges in meeting the fiscal slippage

© Reuters. Passengers disembark from commuter trains at Churchgate railway station in Mumbai, India, February 1, 2023. REUTERS/Niharika Kulkarni

By Siddhi Nayak

MUMBAI (Reuters) – India’s fiscal deficit target of 4.5% of GDP for 2025-26 has been set. will be difficult to achieve, a Fitch Ratings analyst said on Wednesday, adding that the country’s sovereign rating remains stable.

“Essentially, it (the fiscal glide path) implies further consolidation of around 0.7% of GDP for each of the next two fiscal years,” Jeremy Zook, director – Asia Sovereign Ratings at the global rating agency, told Reuters.

“If we look at the recent trend of deficit reduction, it seems like it would be a little more difficult and absurd to achieve that level of deficit reduction.”

The government’s budget gap, which reached a high 9.5% of GDP in 2020/21. as the spread of the COVID-19 infection brought the economy to a standstill, it has since declined, but remains well above the medium-term target of 4.5% of GDP by 2025/26.

The government is targeting a budget deficit of 5.9% of GDP for 2023/24, while the deficit stood at 6.4% in 2022/23, according to revised estimates.

Earlier today, a Moody’s (NYSE: ) Investors Service official also said the government’s target to meet the fiscal deficit target for 2025/26. may contain certain risks.

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