New Delhi, January 19 (SocialNews.XYZ) India’s fiscal deficit is expected to further narrow on the back of increased tax revenue, according to a World Bank report.
The report noted that this trend is expected to contribute to the government’s fiscal consolidation policies.
“In India, the fiscal deficit is expected to continue narrowing, primarily due to higher tax revenues,” the report said.
While fiscal deficits across South Asia are expected to remain tight, the improvement in India’s fiscal position is notable. In contrast, fiscal deficits in other South Asian countries are expected to remain stable as fiscal adjustments are offset by higher interest payments in Pakistan and infrastructure investment in Bangladesh.
The report noted that inflation in the region is expected to moderate over the forecast period, supported by stable exchange rates. Inflation rates are expected to remain within or below target in countries such as India, Nepal and Sri Lanka.
India is also projected to maintain its position as the fastest growing economy among the world’s largest economies, with GDP growth expected to be 6.7% in 2025-26 and 2026-27. .
The report highlighted the sustained growth of India’s services sector and the strengthening of manufacturing activities due to the government’s efforts to strengthen logistics infrastructure and simplify the tax system.
Private consumption growth is expected to pick up due to improving labor markets, increased credit availability and easing inflation, but government consumption growth is likely to remain subdued. Investment growth in India is expected to remain strong, supported by increased private investment, strong corporate balance sheets and favorable financing conditions. These factors are expected to strengthen the country’s economic resilience in the coming years.
The Indian government aims to reduce the fiscal deficit to 4.9% of gross domestic product (GDP) this fiscal year from 5.6% in 2023-24.
India’s net direct tax collection, including corporate tax and personal income tax, increased by a sharp 15.4% to Rs 12.1 billion between April 1 and November 10 this fiscal, according to the latest figures released by the Central Committee. Ta. Direct Taxes (CBDT).
Similarly, GST collections have also increased significantly on the back of increased economic activity.
Strong tax collections are putting more money in government coffers to invest in big infrastructure projects to spur economic growth and introduce pro-poor welfare schemes.
It will also help contain fiscal deficits and strengthen macroeconomic fundamentals. Lower budget deficits mean less government borrowing and more money left in the banking system for big businesses to borrow and invest. This will increase economic growth and create more jobs.
Moreover, a low fiscal deficit suppresses inflation, strengthens economic fundamentals and ensures stable growth.
Source: IANS
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