‘Full budget will follow fiscal journey set out in interim budget’

While assuming nominal GDP growth of 10.5% for FY25, the budget assumes net tax collection to be  ₹26.02 trillion during FY25. (Photo: Mint)
While assuming nominal GDP growth of 10.5% for FY25, the budget assumes net tax collection to be 26.02 trillion during FY25. (Photo: Mint)

Summary

  • The government plans to achieve a fiscal deficit target of 5.1% for FY25

The fiscal journey for FY25 set out in the interim budget will be maintained despite a full budget slated in July after the general elections, finance ministry officials said. The numbers are unlikely to change even if a different government comes to power, the officials said on the condition of anonymity.

“If we intended to go with different numbers, we would have presented more liberal numbers for now (interim budget)," one of the officials said.

“The numbers and targets that have been presented in the interim budget will be maintained unless there is a huge policy shift or the occurrence of a huge exogenous international event," the official added.

A finance ministry spokesperson didn’t respond to emailed queries.

In its interim budget for FY25, the government gave a boost to capital expenditure by raising the allocation on infrastructure projects by 11% to 11.11 trillion for the year starting 1 April.

The government proposed fiscal deficit targets of 5.1% for FY25 and 4.5% or less by FY26.

Commenting on the budget, HSBC Global Research said that with fiscal consolidation and a thrust on capital expenditure, “the budget retains a focus on creating a cycle of long-term growth. The budget paves way for a stronger macro, supporting equity market sentiment and, thus, the investment case for India." 

In addition, the Centre’s borrowing target for FY25 was lowered to 14.13 trillion from budget estimates of 15.43 trillion in FY24, which indicates its objective to keep debt at sustainable levels, while also leaving adequate legroom for the private sector to step up borrowings and invest in capacity expansion.

“The math not only projected a better-than-budgeted deficit target for FY24, but also pegged the FY25 goalpost at a narrower 5.1% of GDP (vs expectations of 5.3-5.4%)," said Radhika Rao, executive director and senior economist, DBS Group Research.

“By extension, gross and net borrowings are much lower than FY24, providing significant relief to the domestic debt markets, which will help keep a lid on cost of borrowing and crowd-in the private sector," she added. While assuming nominal GDP growth of 10.5% for FY25, the budget assumes net tax collection to be 26.02 trillion during FY25 from 23.30 trillion in FY24, aiding fiscal consolidation.

The Centre’s subsidy bill for food, fertilizer and cooking gas has been projected at 3.81 trillion in FY25, compared with a revised estimate of 4.03 trillion in FY24.

So far, the Centre has managed to limit its fiscal deficit for FY24 at 5.9% of GDP despite having to moderate the nominal economic growth assumption for the current fiscal.

 

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App