Analysts expect FM Sitharaman to trim FY24 fiscal deficit to 6% or lower

They pegged the Budget figure for the next fiscal in the range of 5.8-6%

Finance Minister Nirmala Sitharaman will keep on the path of fiscal consolidation and opt for narrowing the FY24 fiscal deficit to as low as 5.8% in the upcoming Budget, analysts said on Tuesday.

The government may go for a fiscal deficit number which will be far lower than the 6.4% of GDP budgeted for FY23, they said, pegging the Budget figure for the next fiscal in the range of 5.8-6%.

Given the fact that this will be the last full Budget of the present government, there may be a temptation to make it into an expansionist one. In the two years following the pandemic, the fiscal deficit -- one of the key parameters while assessing macroeconomic stability which also influences inflation -- went up till 9.3%.

India will have to continue on this journey of fiscal consolidation and it does not have the luxury of pausing for the next few years, the analysts made it clear.

"The government's promised fiscal consolidation path will require a herculean effort over the next few years. Think of it like a long-distance cyclist that needs to keep pedalling hard to reach the finish line; if it were to suddenly stop, it risks falling over," HSBC India's chief economist Pranjul Bhandari said in a note.

"A lower fiscal deficit is key for India's macro stability, especially in an uncertain global environment," she added.

Economists at SBI said they expected the Budget, which is slated to be announced on February 1, to peg the fiscal deficit close to 6%.