Context:
During her interaction with the Indian diaspora in San Francisco, Union Finance Minister Nirmala Sitharaman addressed key issues related to India’s fiscal deficit and debt management. She reassured that the government’s debt was being managed prudently and that there was no risk of the fiscal deficit going out of control.
Fiscal Deficit Management
- Sitharaman confirmed that the government’s fiscal deficit target for FY25 would be met at 4.8% of GDP, and in the following year (FY26), it would likely fall below 4.5% of GDP.
- Despite global uncertainties, including lowered FY26 growth projections, she stressed that the government was firmly on track to achieve these goals.
Debt Reduction Efforts
- The finance minister highlighted that India’s debt-to-GDP ratio has been successfully reduced from 62% of GDP post-COVID to 57.4% in four years.
- The government aims to bring this ratio closer to 50% by 2030, a level significantly lower than many developed countries, which have ratios exceeding 100% of GDP.
- These efforts demonstrate the government’s commitment to fiscal discipline and sustainable debt management.
Bilateral Trade Agreement with the US
- Sitharaman also discussed the ongoing negotiations for a Bilateral Trade Agreement (BTA) between India and the United States. The first phase of the agreement is expected to be signed by fall 2025.
- She emphasized India’s proactive engagement with the US administration, including high-level visits from Prime Minister Modi, Commerce and Trade Ministers, and herself.
India’s Global Leadership and Growth:
- Addressing India’s global leadership, Sitharaman highlighted the country’s progress in strategic sectors such as semiconductors, renewable energy, artificial intelligence (AI), and digital infrastructure.
- She noted that international institutions like the World Bank are recognizing India’s leadership, particularly in digital public infrastructure, AI skilling, and job creation.
Finance Minister Nirmala Sitharaman reassured stakeholders that India’s fiscal policies are on track, with clear goals for reducing the fiscal deficit and managing debt responsibly. Despite challenges, the government’s focus on maintaining fiscal discipline and pursuing strategic global partnerships will likely sustain India’s economic growth and strengthen its role on the world stage. The anticipated Bilateral Trade Agreement with the US is expected to further bolster bilateral relations and economic ties.
