India’s fiscal deficit is projected to decline consistently, driven by increasing tax revenues, according to a report from the World Bank. This trend is viewed as reinforcing the government’s efforts toward fiscal consolidation, with the report indicating that “fiscal deficits in India are anticipated to keep decreasing, primarily due to rising tax revenues.”
Fiscal deficits in South Asia are expected to remain constrained; however, India is distinguished by its strengthening fiscal situation. Conversely, other countries in the region are likely to see stable fiscal deficits, as fiscal reforms are counterbalanced by increased interest payments in Pakistan and significant infrastructure spending in Bangladesh.
The World Bank has indicated that while India is on a positive path, the government debt-to-GDP ratios in South Asia will continue to be elevated, although a gradual decrease is anticipated. High borrowing costs are likely to maintain significant debt-servicing expenses in various nations.
The report indicated that inflation in the region is anticipated to ease during the forecast period, aided by stabilizing exchange rates. It is projected that inflation will stay within or below target levels in nations such as India, Nepal, and Sri Lanka.
