Discuss the potential to high fiscal deficit in India. Discuss the factors contributing to high fiscal deficit in India, discussing the potential consequences of such deficit and suggest measures to ensure fiscal consolidation.

Factors responsible: (1) Global uncertainties - COVID-19 → Russia-Ukraine War → Israel-Hamas issue → Increased fiscal deficit → supply chain disruptions → Increased oil & gas prices (2) Developmental & non-developmental expenditure - capex, infrastructure creation (3) High logistic cost (1.4% of GDP) for above world average. (4) Low exports (< 3% of world) & import dependency.

Potential consequences of high FD: (1) Crowding out of private sector (2) Lack of capex due to high FD. (3) Development & asset creation compromised. (4) Twin deficit problems - High FD & High Current Account Deficit (5) Increased government borrowing & degraded sovereign credit rating. Measures to improve FD: (1) Supporting manufacturing sector and increasing exports (2 billion target - Foreign Trade Policy 2023) (2) MSME-led growth (45% export, 30% GDP contribution) (3) Diversification of supply chains & reduced import dependency (Atmanirbhar Bharat) Curbing fiscal deficit within limit is pre-condition of goal of 30 billion economy by 2047 (Amrit Kaal).

— Komal Punia