India's New Budget: A Strong Move Towards Fiscal Consolidation

Fitch Ratings endorsed India's post-election budget, emphasizing its commitment to fiscal deficit reduction despite coalition demands. The budget aims for a deficit target of 4.9% of GDP for FY25, down from 5.1%, and focuses on economic growth through high public capital expenditure. The budget also highlights support for agriculture, job creation, and manufacturing.

Fitch Ratings has expressed confidence in India's post-election budget, viewing it as a firm step towards fiscal consolidation. The new administration's commitment to reducing the fiscal deficit for FY25 and FY26 remains intact despite coalition demands.

In the FY25 budget, the central government has set its fiscal deficit target at 4.9% of GDP, down from the earlier 5.1%. This target is lower than Fitch's anticipated 5.4% when affirming India's 'BBB-' rating with a stable outlook in January 2024.

The ratings agency highlighted that India's focus on sustaining economic growth through increased public capital expenditure indicates policy continuity. Measures to support agriculture, job creation, and manufacturing were also emphasized in the budget.