Economists Warn PM: Fiscal Risks Mount, Urge Capex Recalibration & Savings Boost

• Economists flagged rising interest obligations (25-28% of govt expenditure), weakening household savings (down to 7-7.5% of GDP), and potential crowding-out of private investment at PM's pre-Budget meeting.
• They urged recalibrating government capital expenditure to around 3% of GDP from current levels, aligning with the original FRBM framework to free up resources for the private sector.
• Concerns were raised over declining household financial savings, which could constrain financing for both government and private sectors and make a 2% current account deficit challenging.
• Participants highlighted that sustained high public capex combined with falling household savings is tightening liquidity and raising bond yields.
• A call was made for a comprehensive fiscal framework integrating both debt and deficit targets, moving beyond a debt-only anchor for better fiscal management.

Why It Matters: Economists advise PM to address fiscal risks by recalibrating capex, boosting savings, and strengthening the FRBM framework.