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S&P Global Ratings Director Andrew Wood has said that reform momentum in India is likely to pick up only after the Lok Sabha elections next year and a little bit of boost to the expenditure in an election year would not adversely impact India's fiscal deficit target.  Wood stated ‘Our expectation is major reforms in the country are probably unlikely right up to the election cycle and until 2024 Parliamentary elections are over. After that perhaps, reform momentum could pick up, particularly if there is a very strong mandate for the next government.’

S&P anticipates that the central government will meet its modestly lower fiscal deficit target and also state governments will be consolidating their finances gradually overtime. Wood said ‘Even if we see a little bit of boost to the expenditure in an election year, in the run up to the elections, revenue growth also remains healthy in India and that has been supporting the gradual pace of fiscal consolidation.’

The fiscal deficit, which is the difference between government expenditure and revenue, narrowed to 6.4 per cent of GDP in the 2022-23 fiscal, from 6.7 per cent of GDP in the 2021-22 fiscal. In the current fiscal, the deficit is budgeted at 5.9 per cent of GDP. As per the fiscal consolidation roadmap, the government intends to bring down the fiscal deficit below 4.5 per cent of GDP by 2025-26.