The upcoming interim Budget for 2024-25, scheduled to be presented by Finance Minister Nirmala Sitharaman just before the Lok Sabha polls, is anticipated to continue the government's focus on substantial investments in major infrastructure projects. The objective is to stimulate economic growth while maintaining fiscal discipline.
The budget is expected to allocate additional funds for social welfare schemes targeting the impoverished and the agricultural sector, emphasizing food security for vulnerable segments and fostering inclusive growth.
Buoyed by robust tax collections in 2023-24, the Finance Minister is in a comfortable position regarding fiscal consolidation. The strong economic growth is anticipated to sustain the momentum in tax revenues for 2024-25, enabling the government to fund significant projects in areas such as highways, ports, railways, power, and social welfare programs without exceeding the fiscal deficit target.
The fiscal deficit target for 2023-24 is set at 5.9%, and the government is poised to meet this goal. Investments in large-scale infrastructure projects generate employment opportunities and income, contributing to a positive economic cycle. Increased demand for construction materials like steel and cement stimulates private investments and job creation, further boosting economic growth.
The previous budget for 2023-24 had substantially increased the capital expenditure on infrastructure projects by 37.4%, reaching Rs 10 lakh crore. Sources suggest that the government plans to further augment this allocation to provide a significant impetus to economic growth.
Social welfare schemes, including the PM Garib Kalyan Yojana, are expected to receive an allocation of approximately Rs 2.4 lakh crore to distribute free foodgrains to over 80 crore impoverished individuals. The agriculture sector, facing challenges due to erratic monsoons, may witness an increased outlay, including substantial subsidies on fertilizers.
While no major tax mobilization or rationalization announcements are anticipated, there may be considerations to address the impact of inflation and rising living costs for salaried individuals. A potential increase in the standard deduction for the salaried class could be announced, injecting more disposable income into consumers' hands and fostering increased spending to stimulate economic growth.
Economists, including those at Barclays, expect the government to comfortably achieve its fiscal deficit target of 5.9% of GDP for 2023-24 and project a deficit target of 5.3% of GDP for the FY25 budget. The emphasis will be on maintaining fiscal discipline to prevent higher inflation and excessive government borrowing, which can negatively impact economic growth and job creation.
(With Agency Inputs)
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