Finance Minister Nirmala Sitharaman on February 1 pegged the government’s fiscal deficit for 2023-24 at 5.9% of gross domestic product (GDP), signalling the government’s intention to step up its game on fiscal justice and walk the talk.

The central government’s fiscal deficit widened to Rs 9.78 lakh crore in April-November, or 58.9% of the full-year target, data from the chief financial officer’s release on December 30 showed.

The fiscal deficit for the first eight months of the last financial year was 46.2% of the previous year’s target. The centre targets a fiscal deficit of Rs 16.61 lakh crore for the current fiscal or 6.4% of GDP in 2022-23.

Total revenue for April-November was Rs 14.64 lakh crore, or 64.1% of the budget estimate for the year. A year earlier, total revenues met 69.8% of budget estimates.

India is on track to be the fastest-growing G20 economy this year but could face headwinds from monetary tightening amid a global slowdown.

The Reserve Bank of India (RBI) is widely expected to wrap up its rate hike cycle early next year after aggressively raising rates since early May to curb red-hot inflation.

The Fiscal Responsibility and Budget Management (FRBM) Act, enacted in 2003, aims to provide a legislative framework to reduce central government deficits and debt to sustainable levels to ensure intergenerational equity in fiscal management and long-term macroeconomic stability.

The FRBM Act and the FRBM Rules 2004 made under it came into force on July 5, 2004. The FRBM framework requires the central government to limit its fiscal deficit to 3% of GDP by March 31, 2021.

It further stipulates that by March 31, 2025, the central government shall endeavour to limit general (central and state) government debt to 60% of GDP and central government debt to 40% of GDP.

However, due to the unprecedented nature of the Covid-19 shock, the fiscal deficit increased from 3.5% of GDP in the 2020-21 Budget estimate to 9.5% of GDP in the revised estimate for the same year.

The fiscal deficit remains high at 6.9% of GDP in 2021-22 as the pandemic drags on into 2022 and welfare-related spending increases. The government expects the deficit to fall to 6.4% of GDP and wants to continue with fiscal consolidation to achieve a deficit below 4.5% of GDP by 2025-26.