Mumbai, Jan 20: The World Bank has projected a continued reduction in India’s fiscal deficit, driven by robust growth in tax revenues.This development aligns with the government’s fiscal consolidation efforts, ensuring a more resilient economic trajectory for the nation.
According to the World Bank report, India’s fiscal deficit is expected to shrink further, distinguishing it from other South Asian countries.
While the region grapples with tight fiscal conditions, India’s position has strengthened due to its impressive tax revenue growth. Conversely, fiscal deficits in countries like Pakistan and Bangladesh remain stable, constrained by higher interest payments and infrastructure investments.
The report also highlights India’s inflation rate stabilizing within target ranges, thanks to steady exchange rates and prudent monetary policies. Inflation moderation is expected to bolster purchasing power and economic stability in the coming years.
India is set to maintain its status as the fastest-growing economy among the world’s largest economies. The World Bank predicts a GDP growth rate of 6.7% for FY2025-26 and FY2026-27, propelled by: growth in the services sector,
strengthened manufacturing activity driven by infrastructure advancements and simplified tax regimes.
India’s tax collection surge is a pivotal driver behind fiscal improvements.
Net direct tax collections (including corporate tax and personal income tax) rose by 15.4%, reaching ₹12.1 lakh crore from April 1 to November 10, as per the Central Board of Direct Taxes (CBDT).
GST collections also witnessed substantial growth, reflecting heightened economic activity.
The Indian government has set an ambitious target to reduce the fiscal deficit to 4.9% of GDP in FY2024-25, down from 5.6% in FY2023-24.