**Executive Summary:**
This document is a response to Lok Sabha Unstarred Question No. 202, answered on July 21, 2025, addressing measures to sustain economic growth, revised fiscal deficit targets for the fiscal year 2025-26, and financial support for States to enhance resilience projects. The government outlines its strategies to maintain economic stability amid global challenges, affirms the existing fiscal deficit target, and details financial support mechanisms for states. No immediate action is required based on this statement.
**Key Points / Main Content:**
* **Measures to Sustain Economic Growth:**
* India's economic resilience is supported by strong macroeconomic fundamentals (steady growth, price stability, fiscal consolidation, external sector performance, foreign exchange reserves, strong banking sector, robust infrastructure).
* The government uses a multipronged approach in response to global challenges (trade tensions, uncertain capital flows, and geopolitical risks).
* Various export facilitation measures are being adopted, including the new Foreign Trade Policy 2023.
* Bilateral engagement with countries for Trade Agreements.
* Liberalization of FDI policy to attract foreign capital.
* Simplifying compliances, promoting digital governance, and decriminalizing legal provisions to attract domestic and foreign investment.
* Strengthening local manufacturing.
* Credit guarantee schemes, emergency liquidity lines and increased public expenditures (capex and welfare measures).
* **Fiscal Deficit Target:**
* The fiscal deficit estimate for 2025-26 remains at 4.4 percent as presented in the Union Budget 2025-26.
* No revision of the fiscal deficit target is deemed necessary or appropriate at this stage.
* **Financial Support to States:**
* Multifaceted financial support provided through centrally sponsored schemes, central sector schemes, Finance Commission grants, SDRF grants, SDMF grants, and other assistance.
* Special Assistance to States for Capital Expenditure includes interest-free loans for capital expenditure and incentivizing reforms; an outlay of 1.5 lakh crore is proposed in the Union Budget 2025-26.
* Incentives for electricity distribution reforms and augmentation of intrastate transmission capacity with additional borrowing allowed for states (0.5% of GSDP), contingent on reforms.
* Launch of a comprehensive multisectoral Rural Prosperity and Resilience program in partnership with states to address underemployment in agriculture.
**Impact Analysis:**
* **States:**
* *Impact:* States receive financial support to enhance resilience and undertake capital expenditure.
* *Action Required:* States can leverage financial support for capital expenditure and reforms. States can participate in electricity distribution reforms and the Rural Prosperity and Resilience program.
* **Indian Economy:**
* *Impact:* Benefits from enhanced economic resilience, sustained growth, and stability due to government measures.
* *Action Required:* No direct action required.
* **Foreign Investors:**
* *Impact:* Benefit from liberalized FDI policy, simplified compliance, and a stable economic environment.
* *Action Required:* Consider investment opportunities in India given the favorable policy environment.
* **Vulnerable Groups:**
* *Impact:* Protected through welfare measures and resilience to economic shocks.
* *Action Required:* No direct action required.
Key Entities Referenced
Ministry of Finance: The ministry responsible for financial matters in the Government of India.
Foreign Trade Policy 2023: A policy aimed at integrating India into the global market and enhancing its trade competitiveness.
Union Budget 2025-26: The annual financial statement presented by the Government of India, outlining the estimated revenues and expenditures for the fiscal year.
Shri Pankaj Chaudhary: Minister of State in the Ministry of Finance.
Finance Commission: A constitutional body that determines the distribution of financial resources between the Union and the States in India.
State Disaster Response Fund (SDRF): A fund available with each State government for providing immediate relief to the victims of notified disasters.
Special Assistance to States for Capital Expenditure: A scheme under which interest-free loans are extended to states for capital expenditure and incentivizing reforms.
Rural Prosperity and Resilience programme: A comprehensive multisectoral programme in partnership with states, which aims to address underemployment in agriculture.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
UNSTARRED QUESTION No. 202
TO BE ANSWERED ON 21 JULY 2025/ASHADHA 30, 1947 (SAKA)
MEASURES TO SUSTAIN ECONOMIC GROWTH
202. Shri Rajmohan Unnithan:
Will the Minister of FINANCE be pleased to state:
(a) the measures planned to sustain economic growth in the light of global challenges;
(b) whether the revised fiscal deficit targets being considered for the fiscal year 2025-26; and
(c) the financial support intended for States to enhance their resilience projects?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a): The government has been taking various measures to boost economic growth in light of
global challenges and uncertainties. India’s economic resilience is underpinned by strong
macroeconomic fundamentals such as steady growth, price stability, credible fiscal
consolidation, resilient external sector performance, robust foreign exchange reserves, a
strong and well-capitalised banking sector, and robust physical and digital infrastructure.
Additionally, India’s well-regulated financial system, credible inflation-targeting regime, and
flexible exchange rate contribute to the economy’s resilience to shocks. In response to recent
global challenges such as trade tensions, uncertain capital flows, and geopolitical risks, the
government has been taking a multi-pronged approach to sustain economic growth. These
measures include, inter-alia,
Various export facilitation measures including adoption of a new Foreign Trade
Policy (2023) to integrate India more effectively into the global market, enhance its
trade competitiveness, and establish the country as a reliable and trusted trade partner
in an increasingly complex global environment;
bilaterally engaging with countries for the finalisation of various Trade Agreements;
liberalisation of FDI policy to attract foreign capital; continued efforts to simplify compliances, promote digital governance, and
decriminalizing legal provisions to attract domestic and foreign investment;
strengthening local manufacturing which exhibits higher forward and backward
linkages with other sectors of the economy; and
credit guarantee schemes, emergency liquidity lines and increased public
expenditures, particularly capex and welfare measures to enhance resilience to shocks
as well as to protect the vulnerable groups in such events.
(b): The estimate of fiscal deficit for the year 2025-26, as presented in the Union Budget
2025-26 is at 4.4 per cent. There is no felt requirement for revision of fiscal deficit target at
this stage, and neither is it considered appropriate.
(c): The Government provides multifaceted financial support to states to enhance their
resilience through various measures such as centrally sponsored schemes, central sector
schemes, finance commission grants (including grants for local bodies, health sector,
incubation of new cities, shared municipal services, grants-in-aid for State Disaster Response
Fund (SDRF), grants-in-aid for State Disaster Mitigation Fund), and other forms of grants
and assistance to states. A key instrument is the Special Assistance to States for Capital
Expenditure, under which interest-free loans are extended to states for capital expenditure
and incentivising reforms. In the Union Budget 2025-26, an outlay of ₹1.5 lakh crore has
been proposed in this regard. To strengthen power sector resilience, the Budget also proposed
incentives for electricity distribution reforms and augmentation of intra-state transmission
capacity, with an additional borrowing of 0.5 per cent of gross state domestic product
(GSDP) allowed for states, contingent on undertaking these reforms. Moreover, the Budget
also proposed to launch a comprehensive multi-sectoral ‘Rural Prosperity and Resilience’
programme in partnership with states, which aims to address under-employment in agriculture.
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