The Union Budget 2025-26 outlines a shift towards the 'debt-to-GDP ratio' as the fiscal anchor for fiscal consolidation starting from FY 2026-27. Discuss the rationale behind this shift.

FRBM Act 2003 outlines 4 indicators for fiscal health measurement, two of which are Fiscal Deficit FD and Debt-to-GDP (D2G). 2025 budget announced shift from FD to D2G. Rationale behind the shift: (1) Limited flexibility in Fiscal Deficit Framework → Only budgetary loss ↓ Reduced scope for financial innovation or sectoral adjustment ↓ Deficit in one sector lost in supplemented in another (2) Narrow scope of FD ↓ Balance sheet emphasis doesn't effectively account for extra-budgetary measures. (3) Adaptability to global conditions ↓ FD very vulnerable to global auditions ↓ Huge uplift due to COVID (4) Compliance problem ↓ Monetary policy affected due to FD compliance ↓ Hence D2G led to lower productive, less spite on addressing above FD concerns.

— D.S.K. Prachet · AIR 193