India's Fiscal Deficit Set to Shrink Amid Economic Growth Surge

The World Bank forecasts a continuous reduction in India's fiscal deficit due to rising tax revenues, contributing to fiscal consolidation. Despite broader regional fiscal challenges, India's economy is bolstered by strong GDP growth, service sector expansion, and manufacturing strength. Debt ratios remain high yet are expected to decline gradually.

In a promising economic outlook, the World Bank has projected a continuous reduction in India's fiscal deficit, largely driven by rising tax revenues. This trend is poised to support the government's fiscal consolidation policies, presenting a stark contrast to other South Asian nations grappling with fiscal challenges.

The latest report highlights India's unique fiscal improvement amidst a regional backdrop of stable deficits, marked by financial adjustments offset by heightened interest payments in Pakistan and infrastructure spending in Bangladesh. However, despite an improving fiscal scenario, caution remains as government debt-to-GDP ratios in South Asia persist at elevated levels, albeit with a gradual decline anticipated.

India's economic growth trajectory remains robust, with projections positioning it as the fastest-growing economy among major world economies. The country's GDP is forecast to grow at 6.7% for the FY2025-26 and FY2026-27. The report underscores the sustained expansion of the services sector and strengthening manufacturing activities, enabled by government initiatives and improved economic conditions. While private consumption is set to rise, government consumption growth may remain tempered.

(With inputs from agencies.)