The Indian government, led by Prime Minister Narendra Modi, may adjust its fiscal deficit target for the upcoming Budget 2024, according to a Bloomberg report. The proposed reduction could bring the fiscal deficit to 5% of GDP or potentially lower, down from the previously set target of 5.1% for the fiscal year ending in March 2025.

The anticipated change reflects the government's intention to manage finances more effectively amid increasing demands from coalition partners for additional funds. These partners have requested over $15 billion in financial aid for their states, adding pressure on the government to boost spending.

Despite this pressure, the government’s financial position remains strong, bolstered by a substantial $25 billion dividend transfer from the central bank and robust tax collections from India's expanding economy. Net direct tax collections have risen by about 20% up to July 11.

Economists surveyed by Bloomberg predict that the fiscal deficit target may be adjusted to 5%, allowing the government to maintain its borrowing limit at ₹14.1 lakh crore ($169 billion) for this fiscal year. A reduced deficit could benefit India’s bond market, where benchmark yields are nearing a two-year low.

India’s fiscal policies are under increased scrutiny following the inclusion of its bonds in major global indexes last month. Credit rating agencies are considering an upgrade of India’s debt rating if fiscal indicators improve.

The Monsoon Session of Parliament is set to begin on July 22 and will run until August 12, with the Budget presentation scheduled for July 23.