With the economy continuing to grow at a robust pace, the government is of the view that fiscal consolidation needs greater attention, they said. According to the first advance estimate, India’s gross domestic product (GDP) is forecast to grow 7.3% in FY24, bettering the preceding fiscal year‘s 7.2%. FY24’s budget had raised spending by 14.1% over the FY23 budget estimate – to ₹45 lakh crore. FY24 expenditure growth was up 7.5% over the provisional number for the last fiscal year.
The Centre will continue quality spending next fiscal by raising capital expenditure, albeit at a slower pace than in recent years, a government official told ET.
Muted hike in capex
This, while lifting revenue spending at a moderate rate, the official said.
Finance minister Nirmala Sitharaman will present an interim budget for FY25 on February 1, leaving the full budget to the next government after the election in April-May.
The Centre has set a fiscal deficit target of 4.5% of GDP by FY26, against the FY24 goal of 5.9%. It is expected to meet the target this year, which means a reduction of 14 percentage points would be needed in the next two years.
It may target a fiscal deficit of 5.2-5.4% of GDP for the next fiscal year.
The hike in capital expenditure is expected to exceed the increase in the overall budget, but much more muted than the 33.4% increase in the current fiscal over the FY23 budgeted level.
The Centre’s capex rose 31% in the first eight months of this fiscal year. Given its high multiplier effect, the government expects elevated capex could continue to spur growth and crowd in private investment in FY25 as well.
Experts said the BJP’s victory in three states — Madhya Pradesh, Rajasthan and Chhattisgarh —of five in December curbed the space for populism ahead of the general election. However, within the projected revenue spending for FY25, it may prioritise some schemes ahead of elections.
The Centre expects nominal GDP expansion next fiscal to improve from the projected 8.9% in FY24 but remain lower than the levels witnessed in the previous two years, said another person.
So, it will likely pencil in a “conservative growth rate in its tax collection” for FY25 as well. The FY24 budgeted net tax revenue marks an 11.1% rise over the FY23 provisional number but the mop-up in the first eight months jumped 17.2% from the year before.
