In a rapidly developing economy like India, budget deficits aren’t necessarily a bad thing. The important thing is to use the deficit for productive purposes (like infrastructure), not wasteful ones (like subsidizing loss-making enterprises).
The Indian government is close to balancing its books for the first time since the Global Financial Crisis of 2007-2009. The preliminary statistics suggest that India will achieve a primary fiscal deficit under 0.2% of GDP for the 2017-2018 fiscal year that ended in March and it would be the fourth consecutive year with a deficit less than 1% of GDP.
India’s primary fiscal deficit, which excludes interest payments on the national debt, has fallen from 1.1% of GDP to virtually nothing since May, 2014. The gross fiscal deficit, which includes interest payments, is down from 4.5% to 3.2%, based on preliminary figures.
The budget deficit targets were revised upward at the beginning of February, so they may come in a little higher than these preliminary estimates but, as expert says the final numbers will come in closer to initial estimates than previously thought.
The disappearing deficit gives the government a fiscal free hand to use the resources in various other pro-poor programme.
If the government’s final pre-election budget is any indication, it’s gone for spending. For the fiscal year 2018-2019, which began April 1, the government has announced big increases in rural healthcare and infrastructure spending. However the state of economy support the governmental push towards rural development, the only question is whether or not they can deliver in time for 2019.