“Over the next five years we forecast India’s government debt to GDP ratio to be broadly stable just above 80% of GDP. This is based on a continued path of gradual deficit reduction, as well as robust nominal growth of around 10.5% of GDP,” it said in its review of the interim budget.
The global rating agency, earlier this month, affirmed India’s ‘BBB-’ rating with a Stable Outlook in January.
“The targeting of 5.1% of GDP deficit in FY25 demonstrates that the government is strongly committed to reducing the deficit and achieving its deficit target of 4.5% by FY26, while maintaining a critical focus on much-needed infrastructure development,” it said, however, pointing out that the country’s debt to GDP and fiscal deficit ratios were still higher than peers.
While Fitch forecast a deficit ratio of 5.4% in FY25, it noted that going by the previous record, the government could achieve a lower 5.1% fiscal deficit to GDP ratio in FY25.
The government’s fiscal deficit in FY24 at 5.8% is expected to be lower than 5.9% budgeted for the year. On the growth front, Fitch expects GDP to expand 6.5% in FY25.“The continued emphasis on capex investment should remain supportive of the growth outlook in FY25, where we forecast real GDP growth of 6.5%,” it pointed out.
The government is expected to spend Rs 11.11 lakh crore on capex in FY25, 16.9% higher compared with FY24’s revised estimates.
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