India will forecast stronger growth next year, sticking to fiscal deficit targets, sources told Reuters

From Nikunj Ohri

NEW DELHI (Reuters) – India plans to project higher economic growth for the next fiscal year, two government officials with direct knowledge of the matter said, adding that fiscal deficit targets are being met and maintained.

Nominal economic growth of 10.3%-10.5% is likely to be forecast, according to one of the officials. That’s up from the 9.7% forecast for the current year to the end of March given this month by the government’s statistics department.

The upbeat outlook could help dispel concerns about an economic slowdown that has gripped markets since November. The government expects the world’s fifth largest economy to record its slowest growth rate in four years in 2024/25.

Finance Minister Nirmala Sitharaman is expected to cut personal income tax in her budget due to be presented on February 1, hoping to boost demand among millions of earners who have been forced to cut discretionary spending due to weak wage growth and high food inflation. .

The tax cut is not expected to affect India’s plans to reduce the fiscal deficit, the sources said, adding that the government expects this year’s budget gap to be 10 to 20 basis points lower than the 4.9% originally forecast.

It will also stick to its target of reducing the fiscal deficit to below 4.5 percent in the coming financial year, they said.

The sources were not authorized to speak to the media and declined to be identified.

The Treasury Department did not immediately respond to an emailed request for comment.

Nominal economic growth is the sum of the country’s real gross domestic product (GDP) and inflation. It is used as a basis for calculating the country’s income, expenditure and deficit projections.