Interim Budget 2024 math: Focus on plausible projections, fiscal discipline
Revenue collections seen to give comfort to fiscal deficit, capital outlay
- Feb 1, 2024,
- Updated Feb 1, 2024 1:47 PM IST
The Interim Budget 2024-25 may not have had any spectacular promises for voters but Union Finance Minister Nirmala Sitharaman has ensured that fiscal discipline is maintained even as the focus on capital expenditure continues in the coming financial year.
Presenting the Interim Budget 2024-25, the finance minister said that the fiscal deficit in 2023-24 will be marginally better at 5.8% of the GDP versus the Budgeted 5.9% and also announced that it would be lowered further to 5.1% in the next fiscal.
“We continue on the path of fiscal consolidation, as announced in my Budget Speech for 2021-22, to reduce fiscal deficit below 4.5% by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1% of GDP, adhering to that path,” the minister said on Thursday.
The Centre has also remained cautious in its growth outlook and has projected nominal GDP growth in FY25 at 10.5%.
“The first impression from the budget speech and fiscal deficit numbers for FY24 and FY25 suggests that the government is serious about achieving the fiscal consolidation path of 4.5% fiscal deficit by FY26. The nominal GDP growth assumption and revenue buoyancy appears plausible and in line with our expectations,” said Devendra Kumar Pant, Chief Economist & Senior Director– Public Finance, India Ratings and Research.
Meanwhile, the minister also announced an 11.1% increase in capital expenditure to Rs 11.1 lakh crore in 2024-25. “This would be 3.4 per cent of the GDP,” Sitharaman said.
The RE for capital expenditure this fiscal has been marginally lowered to Rs 9.5 lakh crore from the BE of Rs 10 lakh crore.
To further strengthen the growth momentum, the Government allocated Rs 1.3 lakh crore in Budget Estimate 2023-24 towards 50-year interest-free loans to the States to boost their respective capital expenditures. The scheme will be continued this year, she added.
Meanwhile, total expenditure in FY25 is seen to grow by 5.8% to Rs 47.65 lakh crore from the RE of Rs 44.9 lakh crore for FY24.
“The higher than expected capex and lower than projected fiscal deficit suggest that the quality of expenditure is going to be healthier than what we had penciled in both in FY2024 and FY2025. Faster fiscal consolidation and a dip in borrowings will help to cool yields further over the coming year, as long as the estimates for revenue and capital receipts appear credible as the year progresses,” said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA.
Sonal Varma, Managing Director, Chief Economist - India and Asia ex-Japan, Nomura said this was not a pre-election budget. “While the budget speech talked a lot about the key voter constituents, it has chosen to prioritise fiscal consolidation,” she said, adding that the overall assumptions are reasonable.
“Over the last two to three years, private capex was weak, so public capex stepped in. Now with private capex likely to pick up, the government is slowly stepping back to prevent crowding out,” she further said.
The comfort on the fiscal front comes from robust growth in tax revenue collections. For FY25, gross tax revenue is estimated to grow by 11.6% to Rs 38.3 lakh crore.
Gross tax revenue in the Revised Estimate for FY24 is marginally higher by 2.29% to Rs 34.37 lakh crore as against the Budget estimate of Rs 33.6 lakh crore.
While corporate tax is seen to grow by 13% to Rs 10.4 lakh crore in FY25 from RE of Rs 9.2 lakh crore, income tax mop up is estimated to rise by a similar 13.1% to Rs 11.56 lakh crore next fiscal. GST collections are also projected to increase by 11.6% to Rs 10.67 lakh crore in FY25 from the RE of Rs 9.56 lakh crore. Revenue from customs duty is estimated to grow by 4.9% to Rs 3.23 lakh crore next fiscal. The RE for customs duty was lowered to Rs 3.08 lakh crore this fiscal from the BE of Rs 3.39 lakh crore.
Market borrowings have also been maintained with gross borrowings at Rs 14.13 lakh crore and net borrowings at Rs 11.75 lakh crore next fiscal.
Food subsidy is set at Rs 2 lakh crore in FY25 versus Rs 2.1 lakh crore in this fiscal and fertiliser subsidy is pegged at Rs 1.6 lakh crore in FY25 from Rs 1.9 lakh crore this fiscal.
Also Read: Budget 2024: FM Sitharaman presents 10 top achievements of Modi government in last 10 years
The Interim Budget 2024-25 may not have had any spectacular promises for voters but Union Finance Minister Nirmala Sitharaman has ensured that fiscal discipline is maintained even as the focus on capital expenditure continues in the coming financial year.
Presenting the Interim Budget 2024-25, the finance minister said that the fiscal deficit in 2023-24 will be marginally better at 5.8% of the GDP versus the Budgeted 5.9% and also announced that it would be lowered further to 5.1% in the next fiscal.
“We continue on the path of fiscal consolidation, as announced in my Budget Speech for 2021-22, to reduce fiscal deficit below 4.5% by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1% of GDP, adhering to that path,” the minister said on Thursday.
The Centre has also remained cautious in its growth outlook and has projected nominal GDP growth in FY25 at 10.5%.
“The first impression from the budget speech and fiscal deficit numbers for FY24 and FY25 suggests that the government is serious about achieving the fiscal consolidation path of 4.5% fiscal deficit by FY26. The nominal GDP growth assumption and revenue buoyancy appears plausible and in line with our expectations,” said Devendra Kumar Pant, Chief Economist & Senior Director– Public Finance, India Ratings and Research.
Meanwhile, the minister also announced an 11.1% increase in capital expenditure to Rs 11.1 lakh crore in 2024-25. “This would be 3.4 per cent of the GDP,” Sitharaman said.
The RE for capital expenditure this fiscal has been marginally lowered to Rs 9.5 lakh crore from the BE of Rs 10 lakh crore.
To further strengthen the growth momentum, the Government allocated Rs 1.3 lakh crore in Budget Estimate 2023-24 towards 50-year interest-free loans to the States to boost their respective capital expenditures. The scheme will be continued this year, she added.
Meanwhile, total expenditure in FY25 is seen to grow by 5.8% to Rs 47.65 lakh crore from the RE of Rs 44.9 lakh crore for FY24.
“The higher than expected capex and lower than projected fiscal deficit suggest that the quality of expenditure is going to be healthier than what we had penciled in both in FY2024 and FY2025. Faster fiscal consolidation and a dip in borrowings will help to cool yields further over the coming year, as long as the estimates for revenue and capital receipts appear credible as the year progresses,” said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA.
Sonal Varma, Managing Director, Chief Economist - India and Asia ex-Japan, Nomura said this was not a pre-election budget. “While the budget speech talked a lot about the key voter constituents, it has chosen to prioritise fiscal consolidation,” she said, adding that the overall assumptions are reasonable.
“Over the last two to three years, private capex was weak, so public capex stepped in. Now with private capex likely to pick up, the government is slowly stepping back to prevent crowding out,” she further said.
The comfort on the fiscal front comes from robust growth in tax revenue collections. For FY25, gross tax revenue is estimated to grow by 11.6% to Rs 38.3 lakh crore.
Gross tax revenue in the Revised Estimate for FY24 is marginally higher by 2.29% to Rs 34.37 lakh crore as against the Budget estimate of Rs 33.6 lakh crore.
While corporate tax is seen to grow by 13% to Rs 10.4 lakh crore in FY25 from RE of Rs 9.2 lakh crore, income tax mop up is estimated to rise by a similar 13.1% to Rs 11.56 lakh crore next fiscal. GST collections are also projected to increase by 11.6% to Rs 10.67 lakh crore in FY25 from the RE of Rs 9.56 lakh crore. Revenue from customs duty is estimated to grow by 4.9% to Rs 3.23 lakh crore next fiscal. The RE for customs duty was lowered to Rs 3.08 lakh crore this fiscal from the BE of Rs 3.39 lakh crore.
Market borrowings have also been maintained with gross borrowings at Rs 14.13 lakh crore and net borrowings at Rs 11.75 lakh crore next fiscal.
Food subsidy is set at Rs 2 lakh crore in FY25 versus Rs 2.1 lakh crore in this fiscal and fertiliser subsidy is pegged at Rs 1.6 lakh crore in FY25 from Rs 1.9 lakh crore this fiscal.
Also Read: Budget 2024: FM Sitharaman presents 10 top achievements of Modi government in last 10 years