Revised Fiscal Deficit Target
Context:
The Centre is on track to meet its revised fiscal deficit target for the current financial year (FY 2025-26), despite facing higher subsidies and increased defence outlays.
The finance minister recently assured the Lok Sabha that the additional spending requirements will not derail the government's macroeconomic stability and fiscal consolidation roadmap
Key Concepts:
Fiscal Deficit:
It represents the difference between the government's total expenditure and its total receipts (excluding borrowings).
It acts as a primary indicator of the government's overall borrowing requirements and financial health.
Supplementary Demands for Grants:
Governed by Article 115 of the Indian Constitution, if the amount authorized by Parliament through the Appropriation Act for a particular service for the current financial year is found to be insufficient, the government can present a supplementary demand for grants to seek additional funds.
Developments:
Supplementary Demands for Grants:
To cover unexpected expenditures, the government sought Parliament's approval for about ₹2 trillion in net additional spending through supplementary demands for grants.
Economic Stabilization Fund:
To navigate global headwinds and unexpected economic shocks, the government is establishing a massive fiscal buffer.
Out of the additional spending budget, 57,000 crore has been earmarked for this "economic stabilization fund".
Target Size:
The ultimate envisioned size of this stabilization fund is ₹3 trillion.
The remaining balance required to reach this target will be accumulated through government savings rather than additional borrowing.
Deficit Projections:
In the February revised estimates, the government had formally projected the fiscal deficit at 4.4% of Nominal GDP for FY26.