India’s finance ministry led by Nirmala Sitharaman under the Narendra Modi government has time and again stressed that fiscal prudence remains a top priority for the dispensation with an eye on FY26 by when it targets to bring the fiscal deficit down to 4.5 per cent.
Come February 1, analysts expect Sitharaman to continue the BJP government’s focus on infrastructure spending with an aim to lower the fiscal deficit from the target of 5.9 per cent of GDP set for the current financial year.
Analysts have said that high hopes of re-election in April-May 2024 has allowed the Modi government to keep a check on populist measures and instead focus on its infrastructure spending like roads, power plants, among other things.
The government expects the Indian economy to grow at 7.3 per cent in the ongoing financial year, as per the First Advance Estimates released Friday. Analysts also said that a growth rate, which tops 7 per cent for the third straight year, in the current global environment would help Modi win the mandate yet again.
Government spending likely rose by around 4 per cent on an annual basis in FY24, compared to a 0.1 per cent increase in the previous fiscal year. At the same time, private investment is pegged to rise by 10.3 per cent, lower than an 11.4 per cent rise in the previous year, data showed.
ETNow earlier this week reported that the government could shrink the FY25 budget deficit target to 5.2 per cent of the GDP.
Fiscal deficit is the difference between expenditure and revenue of the government and is a key indicator of the stability of a country’s economy.
However, some analysts have pointed out that given the increased government expenditure towards capex, there is a risk to the nation’s fiscal deficit and debt, which in turn will keep interest rates elevated. Sitharaman had set aside a record high of Rs 10 lakh crore towards capital expenditure in the Budget announced for FY24.
The government’s fiscal deficit at the end of November stood at Rs 9.06 lakh crore or 50.7 per cent of the full-year budget estimate. In the same period previous year, the deficit stood at 58.9 per cent of the budget estimates of FY23. In absolute terms, the fiscal deficit was at Rs 9,06,584 crore during the April-October period of 2023-24.
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BUDGET FAQs
- What is fiscal deficit? Fiscal deficit is the difference between the revenue and the expenditure of an economy
- What is India’s fiscal deficit? The Indian government hopes to contain India’s fiscal deficit to 5.9 per cent in FY24 before it eventually tries to bring it down to 4.5 per cent by FY26
- When will the Union Budget be announced? Finance Minister Nirmala Sitharaman will announce the Union Budget on February 1, 2024
