India Shines Brightly with Robust Macro Fundamentals: A New Report
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Synopsis
According to a recent report, India stands out globally due to its robust macroeconomic fundamentals. The government is advised to uphold fiscal prudence while continuing on the path of fiscal consolidation. Projections for nominal GDP growth and fiscal deficit are outlined, highlighting the need for reforms in GST.
Key Takeaways
- India's macro fundamentals remain strong.
- Nominal GDP growth for FY26 projected at 10.2%.
- Fiscal deficit expected at 4.5% of GDP.
- Gross market borrowing expected to be Rs 14.4 lakh crore.
- Urgent need for GST reforms highlighted.
New Delhi, Jan 25 (NationPress) India continues to be a shining example on the global stage, bolstered by its strong macroeconomic fundamentals. The report emphasizes that the government should prioritize fiscal discipline and maintain the trajectory of fiscal consolidation.
For FY26, the nominal GDP growth is projected at 10.2 percent, based on expectations of real GDP growth between 6.2 to 6.4 percent and inflation rates ranging from 4 to 3.8 percent, as per the latest findings from SBI Research prior to the Union Budget 2025-26.
According to the report, the nominal GDP is anticipated to reach Rs 357.2 lakh crore.
The fiscal deficit as a percentage of GDP is expected to settle at 4.5 percent in FY26, amounting to Rs 15.9 lakh crore.
However, the report cautions that in light of global uncertainties, particularly concerning the external sector, minor adjustments to the glide path could be beneficial for stimulating growth.
The report forecasts gross market borrowing of Rs 14.4 lakh crore in FY26 due to heightened redemptions, with part of the pandemic-related borrowings reaching maturity. This will result in a net borrowing figure of Rs 11.2 lakh crore (with Rs 4.05 lakh crore in redemptions for FY26 and an expected switch of Rs 75,000 to 100,000 crore).
The government has already executed Rs 1.1 lakh crore in buybacks and Rs 1.46 lakh crore in switches in FY25.
According to the report, it is crucial for communication from policymakers and regulators to be clear and proactive in setting market expectations. Schemes like Just-In-Time (JIT) that influence systemic liquidity require careful adjustments, factoring in both primary and secondary impacts.
The report also highlights the necessity for a second phase of reforms in GST (GST 2.0), advocating for a rationalization of tax rates and the inclusion of electricity tariffs, Aviation Turbine Fuel, and finally petrol and diesel.
Additionally, there is an urgent call to consider exempting or reducing GST on health insurance products, particularly for retail and health-focused items.
