What macro economic data indicates ahead of Interim Budget 2024

Ahead of the presentation of the Interim Budget 2024-25, the latest macro economic data will give policymakers at least some comfort with the fiscal deficit well within control, tax revenues likely to exceed the Budgeted target and capital expenditure still on the fast track. However, industrial production may be muted with the eight core infrastructure industries registering a growth of 3.8% in December, which was the lowest in 14 months. 

Union Finance Minister Nirmala Sitharaman is set to present the Interim Budget 2024-25 on Thursday, which is seen to be fiscally conservative but with sufficient legroom to continue the focus on capital expenditure and social sector schemes. 

On Wednesday, three sets of official data relating to the Centre’s fiscal deficit, goods and services tax collection and core sector industries were released. 

The eight core industries comprise 40.27% of the weight of items included in the Index of Industrial Production. Analysts believe that IIP growth will also be subdued in December with a growth of 1% to 3%. 

“We could expect growth in IIP to be in the region of 2-3% for December,” said Madan Sabnavis, chief economist, Bank of Baroda, while noting that core sector growth was impacted by the high base effect as well as a slowdown in the infrastructure sector. 

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Crude oil production contracted by 1% in December and refinery products, cement and electricity each grew by less than 3% in December. Coal output was the only sub sector that grew at a double digit of 10.6% in the month. 

However, the Centre’s fiscal situation is more optimistic. According to data released by the Comptroller General of Accounts, the Centre’s fiscal deficit was Rs 9.82 lakh crore or 55% of the Budget estimate between April and December 2023, which was nominally lower than 59.8% of the full year target in the same period a year ago.   

Tax revenues grew to a robust Rs 17.92 lakh crore or 74.2% of the full year target in the first nine months of the fiscal, which was marginally lower than 80.4% of the Budget Estimate in 2022-23. Capital expenditure rose to Rs 6.73 lakh crore between April and December 2023, which is 67.3% of the full year target. 

Analysts believe that tax revenues in the current fiscal may overshoot the Budget estimate although the capital expenditure may go down in the last quarter of the fiscal due to the upcoming General Elections. 

“We project the Government of India’s gross tax revenues to exceed the FY2024 Budget estimate by about Rs. 0.6 lakh crore, led by direct taxes and Central GST inflows, amidst an undershooting in other indirect taxes such as excise duty. Setting aside the additional devolution to the states, we estimate that net tax revenues will exceed the FY2024 Budget Estimate by a modest Rs 0.3 lakh crore,” said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA. 

The agency however, expects the Centre’s capex to undershoot the FY2024 Budget Estimate by about Rs 0.75 lakh crore, although it still implies a year on year growth of 26%. 

The fiscal deficit target for 2023-24 is expected to be met in absolute numbers but the 5.9% target could be breached marginally due to lower nominal growth. 

Meanwhile, GST collections in January 2024 was the second highest this fiscal at Rs 1.72 lakh crore. Prior to this, the mop up from GST touched a high of Rs 1.87 lakh crore in April 2023. “With overall collection reaching Rs 16.69 lakh crore, GST collections register 11.6% year on year growth in 10-month period,” said the finance ministry in a statement.