CII Recommends Govt Stick to Fiscal Deficit Target of 4.9% for FY 2024-25

The Confederation of Indian Industry (CII) has urged the government to adhere to its fiscal deficit target of 4.9% of GDP for 2024-25 and 4.5% for 2025-26. The industry body warned that pursuing “overly aggressive targets” could harm India’s economic growth trajectory.

“India’s rapid growth amid a global economic slowdown has been supported by prudent fiscal management, ensuring macroeconomic stability,” said Chandrajit Banerjee, Director General, CII. He emphasized the need for sustainable fiscal planning in the upcoming Union Budget.

CII also highlighted the importance of reducing the debt-to-GDP ratio, recommending a glide path to bring central government debt below 50% of GDP by 2030-31 and below 40% in the long term. This, the body stated, could improve India’s sovereign credit rating and lower interest rates.

The CII proposed instituting Fiscal Stability Reporting, which would include annual assessments of fiscal risks, long-term forecasts (10-25 years), and evaluations of economic factors like technological change and climate impact. Such measures are already practiced globally, from Brazil’s 10-year forecasts to the UK’s 50-year outlook.

To ensure fiscal prudence at the state level, CII suggested three measures:

1. State-level Fiscal Stability Reporting.
2. Encouraging states to manage market borrowings and guarantees responsibly.
3. Developing an independent credit rating system to incentivize states to prioritize fiscal discipline.

These interventions, combined with central government fiscal stability, would ensure long-term economic sustainability and macroeconomic resilience, Banerjee concluded.