New Delhi: In a clear sign of confidence before the crucial general election due in next few months, finance minister Nirmala Sitharaman stayed on the course of fiscal consolidation rather than presenting a populist budget containing schemes that may have further unsettled the health of the government finances, a move that surprised many analysts.
In her budget speech presented last year, Finance Minister Nirmala Sitharaman had estimated that the fiscal deficit for the current financial year would be at around 17.87 lakh crore or 5.9 percent of the country’s gross domestic product (GDP). However, as per the revised estimates for the current financial year, the finance minister was able to keep the fiscal deficit for the current year below the budget estimates, both in terms of absolute numbers and as a percentage of the GDP.
The budget data showed that the fiscal deficit would be at around Rs 17.35 lakh crore, 5.8 percent of the GDP. In terms of absolute numbers, it is almost at the same level of fiscal deficit during FY 2022-23 when it was Rs 17.37 lakh crore.
Devendra Kumar Pant, Chief Economist & Senior Director– Public Finance, India Ratings and Research Comment, said there are two broad themes of this budget are fiscal consolidation and stepping up focus on agriculture and rural areas.
“The first impression from the budget speech and fiscal deficit numbers for FY24 and FY25 suggests that the government is serious about achieving the fiscal consolidation path of 4.5% fiscal deficit by FY26,” Pant said in a statement sent to ETV Bharat.
The economist said it suggests that these are measures to course correct to some extent the differential benefit of the ongoing economic growth which is tilted in favor of households of upper income brackets and urban areas.
The Finance Minister has set a target of bringing down the fiscal deficit to 5.1 percent of the GDP for the next financial year. It is not only a reduction as a percentage of the GDP but it is estimated to decline in absolute numbers as well.
Sitharaman’s budget estimates suggest that the fiscal deficit would come down to below Rs 17 lakh crore to around Rs 16.85 lakh crore in the next financial year starting on April 1, 2024.
It means that the Government estimates that the fiscal deficit, as a percentage of GDP, will decline from 6.4 percent in FY 2022-23 to 5.8 percent in FY 2023-24 and will further decline to 5.1 percent in FY 2024-25, leading the way of bringing it down to 4.5 percent by FY 2025-26.
Nominal GDP for BE 2024-25 has been projected at around Rs 328 lakh crore, assuming 10.5 percent growth over the estimated Nominal GDP of over Rs 296 lakh crore as per the First Advance Estimates of FY 2023-24.
Devendra Kumar Pant of India Ratings and Research, a Fitch Group rating agency, said the nominal GDP growth assumption and revenue buoyancy appears plausible and in line with our expectations.
He said the net market borrowing of Rs 11.75 lakh crore in FY 2024-25 augurs well for the bond market and is likely to have a favorable impact on 10-year G-Sec yields.
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