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 forwardlooking
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.