When you need to keep fiscal discipline, be a Dravid and not Pant

Just like a solid Test match batter, fiscal discipline sometimes requires the patience and steadiness of Rahul Dravid rather than the aggressive stroke play of Rishabh Pant. The Union Budget for 2025-26 follows this approach—prioritizing stability and long-term sustainability over short-term expansion. By maintaining a measured fiscal consolidation strategy, the government has ensured that economic stability is not compromised, even while providing tax relief and managing external uncertainties.

The Centre has successfully kept fiscal consolidation on track despite a challenging economic environment and the Rs 1 lakh crore tax relief for the middle class. A degree of expenditure compression also contributed to this effort. Currently, the fiscal deficit remains the only operational target for fiscal consolidation. In the revised estimate for 2024-25, the government has set its fiscal deficit at 4.8% of GDP, slightly lower than the previous estimate of 4.9%. For 2025-26, it is projected to decline further to 4.4% of GDP.

According to the budget statement on fiscal policy, "Since FY 2021-22, adoption of an operationally flexible fiscal consolidation path has served the country well. India is now set to attain the goal outlined in the Budget for FY 2021-22 and reach fiscal deficit level below 4.5% of GDP in FY 2025-26." The statement further emphasizes that unless any major macroeconomic shocks occur, the Centre will aim to ensure that the fiscal deficit remains aligned with a long-term strategy. From FY 2026-27 to FY 2030-31, the goal will be to keep government debt on a declining trajectory, targeting a debt-to-GDP ratio of approximately 50% (plus or minus 1%) by March 31, 2031—the final year of the 16th Finance Commission cycle.


Also Read: Sitharaman aims lower FY26 fiscal deficit at 4.4% amid economic concerns

"The Budget outlines its intent of reducing the central government debt-to-GDP ratio to 50+/- 1% by 2030-31 from 56.1% projected for 2025-26. Our calculations show that this would align with a fiscal deficit of close to 3-3.3% of GDP and provides space for a capex target of close to 3-3.5% of GDP by 2030-31," HDFC Bank economists Sakhshi Gupta and Mayank Kumar Jha stated in a note.

Also Read: How did Sitharaman pull off making two worlds happy at same time

The fiscal policy statement highlights that, in the post-Covid years, a glide path of fiscal consolidation—marked by prudence and flexibility—has yielded positive results. Looking ahead, the Centre intends to maintain a balance between developmental priorities and fiscal prudence. "The fiscal policy would be grounded in reforms, resilience, and readiness. This approach should not only invigorate the growth momentum but also create necessary fiscal buffers to enable the government to effectively respond to emergent global and domestic challenges," the statement notes.

By sticking to a disciplined and cautious fiscal strategy, the government is ensuring that economic stability is maintained, much like a batter who values his wicket rather than chasing risky shots. This measured approach, while not flashy, is designed to build long-term economic resilience and sustainable growth.

(With ToI inputs)