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Updated February 1st, 2024 at 07:36 IST

Interim Budget 2024: Key things to watch out for

A higher capex target would impinge on the government’s ability to bridge half the required fiscal consolidation in FY25

Business Desk
India fiscal deficit 2024-25,
India fiscal deficit 2024-25, | Image:Freepik
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Budget 2024: The Finance Minister will stand up on February 1 to present the details of what the government earned and spent in the year and what it's likely to spend for the next fiscal. Even though the Finance Minister had already clarified that the budget this year will be just a vote on account, but economy watchers are sitting tight, watching out for key numbers in the upcoming budget

Key things to watch out for in the interim Budget

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CAPEX

The government allocated Rs 10 lakh crore in the Budget 2023 for building new assets to crowd in private investments. This year too, the Street is expecting, the capex push to sustain further but with a marginal uptick in the outlay.  Credit rating agency ICRA in pre-budget memorandum, also shed light on the likely capex in FY25. 

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According to ICRA, along with the projection of an appreciable dip in the revenue deficit, would allow for a capex target of Rs. 10.2 trillion for FY2025, 10 per cent higher than the expected level for FY2024 vis-à-vis the 20 percent-plus YoY expansion seen during FY2021-FY2024. 

A higher capex target would impinge on the government’s ability to bridge half the required fiscal consolidation in FY25, thereby making the task of reaching a medium-term fiscal deficit target by FY26 even more challenging.

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Fiscal Prudence

The Street and the investors are also looking up to the fiscal deficit target very closely. The government has set the target of 5.9 per cent of GDP this fiscal, however, various credit rating agencies are projecting the fiscal deficit target this year somewhere between 5.2-5.3 per cent of GDP in FY25.  This is the key, as this will determine the amount the government is going to borrow from the market.

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Big Borrowing

The government borrowing numbers will be closely watched. In FY24, the government budget estimate of gross borrowing stood at Rs 15.4 lakh crore. This time also the analysts are projecting gross market borrowing to stand at Rs 15 lakh crore which would be lower than the borrowing budget estimate of FY24, however, still higher than the gross market borrowing estimate of Rs 14.1 lakh crore in FY23. 

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Robus Tax Collection 

Robust tax collection in FY24 provided a huge comfort to the government, especially at a time when non-tax revenues were subdued, and when the government incurred more than budgeted expenditure on subsidies such as food, fertiliser, and fuel.  The more than-budgeted expenditure by the government is being offset by robust tax collection in the current fiscal. Experts are hopeful that the tax collection momentum will continue even in the next fiscal. The government budget estimate of gross tax collection stood at Rs 33.6 lakh crore in FY24. However, analysts are expecting the revised estimate to be somewhere between 34-34.2 lakh crore in FY24. Considering the robust tax collection, the gross tax collection is expected to stay at Rs 38.0 lakh crore in FY25. 

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Social Schemes Spending 

Another important aspect is the spending on social welfare policies. Since this budget is the last before the nation goes to polls, brokerage firms and credit rating agencies are anticipating an uptick in the allocation of social welfare spending by the government. According to Jefferies, the government is expected to increase social welfare spending by 7-8 per cent in FY25, compared to a 3 per cent increase in FY24.

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Published January 28th, 2024 at 16:42 IST

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