Sun Dec 08 16:33:04 UTC 2024: **CII Urges Government to Maintain Fiscal Deficit Targets for Stable Growth**
NEW DELHI, Dec 8, 2024 – The Confederation of Indian Industry (CII) has recommended that the Indian government maintain its fiscal deficit targets of 4.9% of GDP for 2024-25 and 4.5% for 2025-26. CII Director General Chandrajit Banerjee warned that exceeding these targets could negatively impact India’s economic growth.
Banerjee emphasized the importance of prudent fiscal management for sustaining India’s robust growth amidst a global slowdown. The CII’s suggestions for the upcoming Union Budget include a roadmap to reduce the central government’s debt-to-GDP ratio to below 50% by 2030-31 and below 40% in the long term. This, the CII argues, would improve India’s sovereign credit rating and lower interest rates.
To enhance long-term fiscal planning, the CII proposed the establishment of Fiscal Stability Reporting, encompassing annual reports on fiscal risks under various scenarios and a long-term forecast (10-25 years) considering factors like economic growth and climate change. This proactive approach, mirroring practices in countries like Brazil and the UK, would help anticipate economic challenges and their fiscal implications.
The CII also highlighted the need for fiscal prudence at the state level. They suggested three interventions: encouraging state-level Fiscal Stability Reporting, improving transparency in state borrowing practices, and creating an independent credit rating system for states to incentivize responsible fiscal management. This rating could be used to influence state borrowing autonomy and central government transfers.
Banerjee noted that combined state government spending now exceeds central government spending, underscoring the importance of fiscal discipline at both levels for overall macroeconomic stability and sustainability.
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