India's Relaxed Fiscal Consolidation Path to Aid Growth, HSBC Says

MT Newswires Live02-02 19:58

India's slower fiscal consolidation goal will anchor growth, HSBC said in a Monday research note.

The country's central government has set a fiscal consolidation target of 4.3% of GDP for fiscal 2027, compared with a fiscal deficit of 4.4% achieved in fiscal 2026, the equity research firm said.

The goal is the smallest in the past six years, which entails a fiscal trajectory that has likely shifted "from negative to neutral" and could continue until fiscal 2031, HSBC chief India economist Pranjul Bhandari said.

Meanwhile, the nominal GDP growth estimate of 10% looks "reasonable," with lower fiscal deficit as lower current expenditure mitigating reduced tax and nontax revenue, the analyst said.

Taxation changes and greater capital expenditure serve as short-term factors, but developments and policy response in services, manufacturing, and urban infrastructure have multi-year implications, HSBC said.

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