Finance ministry gearing up for full budget before 15 July

New Delhi: The finance ministry is preparing to present the full budget for FY25 between 5 ans 15 July, with very few changes to the estimates made in the interim budget but with a strong emphasis on the strategy for steering economic growth over the next five years, two persons privy to discussions in the government said. 

While some tweaks to the estimates made in the interim budget in view of the revenue buoyancy trend are likely, the full budget for the current financial year may not see too many changes as fluctuations in spending requirements and receipts could also be accommodated in the revised estimates to be presented next year, said one of the persons quoted above.

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Besides, for certain spending requirements like fertilizer subsidies, there is an implied commitment to meet whatever is the requirement on the ground, irrespective of budget allocations at the beginning of the year. 

Any shortfall that can’t be met by receipts, will be addessed through supplementary demands for grants. The same applies to any extra demand for legally guaranteed rural jobs, said the person.

Key change

One key change in the full budget would be about the accounting of the more-than-expected RBI dividend of ₹2.11 trillion for the Central government for FY24. The interim budget had accounted for only a little more than ₹1 trillion as dividend from the RBI, banks and financial institutions in FY25. As a result, some of the extra receipts could be used for pre-payment of the Centre’s debt and for further improving the fiscal deficit position, said the first person quoted above. 

In December last year, the ministry had said that the combined government debt of the Centre and states stood at about 81% of GDP but would substantially decline in the medium term and that the Centre was on course to achieving the fiscal deficit target of 4.5% by FY26. Interest payments of the Centre for FY25 stands at ₹11.9 trillion, nearly two-fifth of revenue.

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In the case of the Centre’s capital expenditure, the second person quoted above said that the plan as of now is to go by the guidance provided in the interim budget. The government had proposed ₹11.11 trillion of capital expenditure in FY25, an increase of 11.1% from the revised estimates for FY24. 

Enough legroom

Experts believe there is enough legroom for the government to make improvements in both the fiscal consolidation glide path and in capital spending. 

“Capital expenditure can be further enhanced and the signals given in the interim budget for fiscal consolidation can be further improved upon in view of the buoyant tax revenue and non-tax revenue collections. The full year budget could lay the framework for medium term growth. As global conditions are the way they are, domestic conditions will have to drive growth,” said EY Chief Policy Advisor DK Srivastava.

The finance Bill to be presented would show the government’s strategy for boosting investments in manufacturing, financial services and for boosting trade. 

The ministry has to take a call on whether to extend the 15% concessional corporate tax rate for new manufacturing companies, which was available till 31 March 2024. Also, the budget would be an opportunity for the government to announce any expansion in the production linked incentive scheme. Both the ruling NDA government and the opposition Congress party have highlighted manufacturing sector as a key economic agenda for them. 

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While acknowledging that an increasing share of government spending is now going into infrastructure, S&P Global Ratings had on Wednesday said that it expects broad continuity in economic reforms and fiscal policies to continue regardless of the election outcome. 

Former Finance and Economic Affairs Secretary Subhash Garg said the agency is signalling to the new government to continue policies towards capital investment and fiscal consolidation.