India’s fiscal deficit has been a concern for policymakers. The government aims to reduce it to 4.5% of GDP by 2025. However, rising expenses, particularly on subsidies and interest payments, pose a challenge. The recent budget allocated 3.3 lakh crore for subsidies, a 10% increase from last year.
To achieve fiscal prudence, the government must rationalize subsidies and boost revenue growth. A 1% increase in GST rates could generate an additional 50,000 crore in revenue. The government must strike a balance between fiscal discipline and social welfare.