New Delhi : The Confederation of Indian Industry (CII) has proposed a cautious fiscal strategy for the upcoming Union Budget, recommending that the government maintain a fiscal deficit target of 4.9 per cent of GDP for 2024-25 and 4.5 per cent for 2025-26.
The industry body warns that excessively aggressive fiscal targets could potentially hinder India’s economic growth.
Chandrajit Banerjee, Director General, CII, emphasised the critical role of prudent fiscal management in sustaining India’s robust economic performance amid a global economic slowdown.
The organisation has outlined a comprehensive approach to fiscal planning that extends beyond immediate budgetary considerations.
The CII suggests a strategic glide path for reducing the Central government’s debt, proposing to bring it below 50 per cent of GDP by 2030-31 and further down to under 40 per cent in the long term.
This approach is expected to have a positive impact on India’s sovereign credit rating and potentially influence interest rates in the economy.
To enhance fiscal transparency and forward-looking planning, the CII recommends instituting Fiscal Stability Reporting.
This initiative would involve annual reports detailing fiscal risks under various scenarios and long-term forecasting spanning 10 to 25 years.
The proposed reporting would account for critical factors such as economic growth, technological advancements, climate change, and demographic shifts.
The industry body has also proposed three key interventions to promote fiscal discipline among state governments.
These include encouraging state-level fiscal stability reporting, creating an independent credit rating system for states, and using these ratings as a parameter for determining government transfers and financial autonomy.
Banerjee highlighted the significance of fiscal prudence at both the central and state levels, noting that state governments’ combined spending now exceeds that of the central government.
The proposed measures aim to create a comprehensive framework for fiscal sustainability and macroeconomic stability.
The CII’s recommendations underscore the delicate balance between maintaining fiscal discipline and supporting economic growth, providing a nuanced approach to India’s fiscal management in the coming years.
