Fiscal deficit: If the struggle between India and Pakistan increases after the attack on terrorist camps in Pakistan, then India’s fiscal deficit may come under pressure. Economists have warned that the pressure may increase further if stress continues. But he also said that if the situation remains under control, the comprehensive economic impact is likely to be limited.
A public sector bank economist said, “From the fiscal point of view, capital expenditure can be cut and money can be invested elsewhere. But the high fiscal deficit will not have any significant impact on the fiscal discretion.”
The government has targeted to reduce the fiscal deficit by 4.4 percent of the GDP (GDP) in FY 2026. This is less than 4.8 percent of the revised fiscal deficit target for FY 2025. In addition, the target is to reduce the loan-GDP ratio by 50 percent by the financial year 2031, with a difference of one percent on both sides. Economists believe that if the situation is under control, the economy will not have any major impact.
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Senior economist of a research institute said, “In the last 10 years, there have been unwanted incidents of infiltration in India and there have been reactions to it.” Until such incidents are controlled, they will not have much effect.
Moody’s Ratings said on Monday that tension with Pakistan is unlikely to have any major impact on India’s economic performance. But excessive expenditure on defense can affect fiscal consolidation and slow down fiscal consolidation. Moody’s ratings predicted that there would be sometimes clashes, but they would not cause full-scale military conflict.
The Ministry of Defense has been given a budget of Rs 6.81 lakh crore for FY 2025-26. This increase is 6.26 percent compared to the revised estimate of FY 2025 and 9.53 percent compared to the budget estimate of FY 2025. This is 13.45 percent of the total national budget of FY 2026 and is the highest allocation given to the Ministry of Defense as compared to other ministries. This amount is 1.91 percent of GDP.
Economists say that it is important to monitor the developments in the next few days and if stress increases, it can also affect private capital expenditure. The economist of a consultation firm said, “The stock market has contributed to it.” We have to see what kind of resistance comes out. Additional expenditure may increase GDP. But it will not be good for fiscal deficit.
In addition to the fiscal deficit, experts have also warned against creating artificial scarcity. This may increase prices, while food inflation has started declining. If the struggle increases then this is likely to happen. The economist said, “At a time when many things are going in favor of India, it can affect perception.” The government is doing more work than as much as it thinks.
